Iraq passes bill to unlock funds for cash-strapped state

[Pitcher]

https://abcnews.go.com/International/wireStory/iraq-passes-bill-unlock-funds-cash-strapped-state-71434480
 

Iraq passes bill to unlock funds for cash-strapped state

Iraqi lawmakers have passed a crucial bill allowing the country to finance a widening fiscal deficit amid an unprecedented economic crisis spurred by falling oil prices and the pandemic

ABC News

By

SAMYA KULLAB Associated Press

June 24, 2020, 2:04 PM

2 min read

BAGHDAD -- Iraqi lawmakers Wednesday passed a crucial bill allowing the country to finance a widening fiscal deficit amid an unprecedented economic crisis spurred by falling oil prices and the pandemic. 

Of 329 members of parliament, 168 voted in favor of a law enabling domestic and foreign borrowing by the government, a key legal step for Iraq to access funds and pay state salaries as revenues take a hit with plummeting oil prices.

Iraq depends on oil exports to fund the lion's share of it's state expenditures, including a bloated public wage bill. But month-to-month earnings have been half of what the government had projected to fund the 2020 budget as oil prices hover between $20-$30. 

The bill's passage was necessary to enable the government to request loans both internally and through international monetary agencies because the 2020 budget was not passed due to political deadlock. 

“(The law) prevents the government from taking loans without prior approval from the Council of Representatives,” said Kurdish lawmaker Sarkawt Shamseddine, explaining why the vote was necessary. 

To pay public sector workers in the short term the government plans on borrowing from state banks, according to three Iraqi officials. But this is expected to require another parliament vote. The officials spoke on condition of anonymity in line with regulations. 

The government is in talks with the International Monetary Fund, but to qualify for budgetary support Iraq will have to initiate major reforms. A recent move to cut public sector salaries and pensions was rejected by lawmakers in a major blow to the government's reform efforts.6

[Pitcher]

https://www.shafaaq.com/en/iraq-news/the-iraqi-parliament-approves-the-borrowing-law/
 

The Iraqi parliament approves the borrowing law

 

2020/06/24 07:57:19

Shafaq News / The Iraqi parliament approved, on Wednesday, the law draft that allows the government to resort to internal and external borrowing to cover the country's fiscal deficit.

A parliamentary source told Shafaq News agency that the majority of the parliament voted, during the session, in the presence of 168 MPs (out of 329), to pass a draft law submitted by the government regarding internal and external borrowing.

The government has submitted the law draft that includes an amount $ 5 billion of external borrowing, and 15 trillion dinars of internal borrowing to address the financial deficit in the country.

The Iraqi government is struggling to secure employee salaries and other operating expenses due to the collapse in oil prices, which has paralyzed large sectors of the world economy. The country relies on the revenues from the sale of crude oil to finance 95% of the country's expenditures.

It is expected that the Iraqi economy will face a 10% of contraction.

[Laid Back]

Why they want to borrow more money to cover fiscal deficit instead of increase the dinar exchange rate against the dollar.? 🤔

 

 

[blueskyline]

Are they borrowing 15 trillion internally . In small notes is my question ?

[blueskyline]

Thanks Pitcher , GE DV's !

 

[Thief]

2 hours ago, Pitcher said:

Iraqi lawmakers Wednesday passed a crucial bill allowing the country to finance a widening fiscal deficit amid an unprecedented economic crisis spurred by falling oil prices and the pandemic.

 

1 hour ago, Laid Back said:

Why they want to borrow more money to cover fiscal deficit instead of increase the dinar exchange rate against the dollar.? 🤔

 

 

 

Iraq prepared a budget deficits law. 
For this law to be approved, they need to show how they are going to bridge the gap between their income (revenues) and their spendings.

 

Regardless of whether they are going to RV or not, their 'income' projection would still depends on the number of barrel sold at the prevailing oil prices. 

If revenues/income are insufficient to fund government spending, they have to borrow. 

 

Revaluation only affect the value and the purchasing power of their currency not the income of their country. 🙏

 

 

[Dinarrock]

Thanks Thief for that well thought out explanation and you are 100% correct! So many people think that once Iraq raises the value of the dinar to say a dollar that somehow that just creates all this magic money for them to be able to pay their debts with and it doesn’t!! Their income still depends on what they are selling to make money which in Iraq’s case is what 90% oil barrels. Your explanation is perfect however that most should be able to grasp the difference and why no matter what if their currency is at 1/10th of a penny or worth $1.17 tomorrow Iraq would still have to borrow the exact same amount of money to pay all their debts!

Edited June 25, 2020 by Dinarrock

[Laid Back]

Thanks @Thief  and @Dinarrock for your comments.!

[Thief]

5 hours ago, Dinarrock said:

Thanks Thief for that well thought out explanation and you are 100% correct! So many people think that once Iraq raises the value of the dinar to say a dollar that somehow that just creates all this magic money for them to be able to pay their debts with and it doesn’t!! Their income still depends on what they are selling to make money which in Iraq’s case is what 90% oil barrels. Your explanation is perfect however that most should be able to grasp the difference and why no matter what if their currency is at 1/10th of a penny or worth $1.17 tomorrow Iraq would still have to borrow the exact same amount of money to pay all their debts!

 your explanation is even better... 

[screwball]

10 hours ago, Pitcher said:

https://www.shafaaq.com/en/iraq-news/the-iraqi-parliament-approves-the-borrowing-law/
 

The Iraqi parliament approves the borrowing law

 

2020/06/24 07:57:19

Shafaq News / The Iraqi parliament approved, on Wednesday, the law draft that allows the government to resort to internal and external borrowing to cover the country's fiscal deficit.

A parliamentary source told Shafaq News agency that the majority of the parliament voted, during the session, in the presence of 168 MPs (out of 329), to pass a draft law submitted by the government regarding internal and external borrowing.

The government has submitted the law draft that includes an amount $ 5 billion of external borrowing, and 15 trillion dinars of internal borrowing to address the financial deficit in the country.

The Iraqi government is struggling to secure employee salaries and other operating expenses due to the collapse in oil prices, which has paralyzed large sectors of the world economy. The country relies on the revenues from the sale of crude oil to finance 95% of the country's expenditures.

It is expected that the Iraqi economy will face a 10% of contraction.

Great news...but me thinks oil law needs to pass next week or so I hope