The Iraqi parliament on 29 January passed the 2015 budget bill, projecting a deficit of ID25 trillion ($21bn) after trimming its oil price assumption down to $56/B from $70/B in an earlier draft. The projected deficit will require heavy borrowing by the state from local and international financial institutions, as Baghdad grapples with the twin threats of sharply lower oil prices and the Islamic State. The bill formalizes an oil export and revenue-sharing agreement with the Kurdistan Regional Government (KRG), despite objections by some members of parliament to what they see as preferential treatment of the KRG, which will receive 17% of actual federal expenditure.

A 2 December agreement with the KRG, incorporated in the budget to ensure regular flows of federal funds to Erbil, will, in theory, see the KRG hand over 250,000 b/d of its crude oil for export by state oil marketer SOMO. The KRG will also facilitate the export of 300,000 b/d of federal oil from northern fields through its pipeline system to the Turkish terminal of Ceyhan though the breakdown of these volumes and their provenance is still unclear since the Kurds now control roughly two thirds of the Kirkuk oil field. Oil revenue from the sale of 3.3mn b/d are projected at ID79 tr and make up nearly all revenues forecast at ID94 tr versus total expenditure of ID119 tr. The oil ministry projected revenues of some ID94 tr will come mainly from oil exports of 3.3mn b/d, including Kurdish oil. (CONTINUED - 1230 WORDS)