Iraq's updated 2016 budget in theory hikes provincial oil payments from $2/B to $5/B. It keeps the KRG's 17%. But the political rift with the KRG and stretched finances, make implementation unlikely. A $45/B oil price assumption is kept from September’s initial draft despite Iraqi oil prices having fallen below $30/B.

Iraq’s economy has been hammered by the twin shocks of the ongoing conflict with Islamic State and the oil-price crash. Oil revenues constitute the majority of government income, and MEES figures show these crashing to $50.4bn in 2015, down from $84.3bn in 2014 and the lowest since 2009 (MEES, 11 December). Underlining the extent of Baghdad’s financial woes, the government last month agreed to implement IMF-instigated reforms as a prelude to a possible financing deal, despite the inherent austerity measures being politically contentious (MEES, 13 November). (CONTINUED - 1201 WORDS)