The two sides of the 2015 budget
How is the new 2015 budget going to shape the Iraqi and Kurdish economy? What are its pros and cons?
The price of crude oil is having a direct negative effect on the Iraqi budget which is estimated at around 150 trillion Iraqi Dinars. During the budget deliberations, the estimated price per barrel of oil was reduced from $70 to $55 dollars to reflect the latest oil market trend and make the budget more realistic. This in turn has revealed a big budget deficit of more than 40 trillion Iraqi Di- nars. As a result, the 2015 budget is an austerity budget that has cut down on most extra expenses. The grim reality of war against I.S.I.S is shown by the biggest portions of the budget that are taken by the ministries of Defense, Interior and Energy. The average Iraqi citizen will not have an improved living standard as a result of the 2015 budget. Is that the case for all Iraqi citizens?
On the upside, the Kurdistan Region seems to be the primary beneficiary from the 2015 budget. For the first time it’s going to receive its full share of the constitutional 17% of the total national budget. In addition, the Peshmarga wages and certain other military expenses will be paid for directly by the Iraqi government. Previously it was paid from the Kurdistan Region’s own budget. This is no favor done for the Kurds. Why? Firstly, because the Kurdistan budget share is not paid to the Kurds for more than half a year. Secondly, without Peshmarga help the campaign against I.S.I.S would fail. Lastly, the Iraqi government is in dire need of the governorate of Kirkuk, which is under Kurdish control, to boost its crude oil production to reduce the 2015 budget deficit.
On the downside, the big fall in crude oil price seems to herald nothing but economic doom and gloom in the 2015 budget. However, upon closer inspection, the Kurdistan Region is quite probably going from economic bust to boom.