Iraq’s cabinet this week approved its 2021 draft budget, which calls for a record deficit of ID65 trillion ($43.4bn) – a fact that will no doubt complicate efforts to receive parliament’s approval. In terms of revenue, the budget projects 3.25mn b/d crude exports, including 250,000 b/d to be handed over by the KRG (MEES, 24 December), with a relatively conservative average export price of $42/B.
In reality, the total deficit will likely be considerably smaller than that in the budget: Iraq has repeatedly underspent in recent years, particularly when it comes to investment expenditure. MEES estimates Iraq’s federal deficit at just $20.3bn this year (MEES, 27 November) with total spending in the $63-65bn range. Budgeted annual expenditure is typically well over $100bn.
That Iraq has also devalued its currency in the 2021 budget by 23% will also put less pressure on expenditure – though this isn’t necessarily a good thing. A lack of investment spending has starved public infrastructure and economic growth in recent years, with current spending (mainly salaries and pensions) dominating the government outlay.