Thursday AM Iraq Economic News Highlights 7-21-22

Iraq’s debt set to fall steeply in 2022: Fitch Ratings

July 20, 2022   Al Magreb Street (Morocco Street) in Baghdad, Iraq.

Baghdad (IraqiNews.com) – Iraq’s government debt is set to fall steeply as a share of GDP in 2022, bringing it to pre-Covid-19 pandemic levels, says Fitch Ratings. This is positive for the sovereign’s creditworthiness, but the decline may not be sustainable, as it partly reflects political tensions that have constrained public spending and reflect the high political risk captured in Iraq’s ‘B-’ rating.

Fitch Ratings’ expects debt/GDP to drop as higher oil prices – which they estimate will average at USD105/barrel (bbl) in 2022 and USD85/bbl in 2023 – and production boost government revenue and nominal GDP. Their forecast fall in Iraq’s government debt/GDP ratio in 2022, to around 47% of GDP, from 66% in 2021, is the largest for any sovereign in the Middle East and north African region, bringing the country below the median for ‘B’ rated sovereigns.

Al Magreb Street (Morocco Street) in Baghdad, Iraq.

Iraq, the second largest producer in OPEC, sits on enormous oil reserves, and revenues from the sector feed 90 percent of the federal government budget.

In Fitch Ratings’ January 2022 affirmation of Iraq’s rating, they stated that positive rating action could result from a sustained period of elevated oil prices, particularly if combined with higher oil production and exports, leading to a downward trend in government debt/GDP and larger foreign reserves. Nonetheless, there is still significant uncertainty about public finance trends and the oil price outlook.

Iraq’s falling debt ratio also reflects its failure to form a government and pass a budget since its October 2021 elections. This constrained spending to 2021 levels until parliament passed an emergency funding bill on 6 June to allocate USD17 billion, or 7% of GDP, for food and energy subsidies and salaries. Subsidy programmes, which remain unreformed, were in danger of running out of money due to the rise in global commodity prices.

Fitch Ratings forecast of a 17% of GDP fiscal surplus in 2022 assumes a 6% of GDP boost in spending, broadly consistent with the emergency funding. However, risks to their spending forecasts are on the upside, as any new budget is likely to entail higher spending in light of Iraq’s pressing social and economic development needs.

Fitch Ratings still forecast some nominal reduction of debt in 2022 if a new budget passes, in particular of accumulated central bank claims on the government, which had risen to about 13% of GDP in 2021. However, accelerated spending could impair the sustainability of public debt reduction. This could track a similar path as in 2018, also following elections, when public spending was slow to accelerate after oil prices rose, leading debt to fall to a degree, but spending eventually rose strongly.

It remains unclear whether an incoming government will execute reforms put forward in a whitepaper under the previous administration in October 2020, even if Prime Minister Al Kadhimi is re-appointed. Parliament took out proposals for income tax reform from the 2021 budget, while other reforms, such as the removal of fuel subsidies for electricity generation, were approved, but not implemented.

The political outlook remains volatile. The largest parliamentary faction, led by Shia cleric Muqtada al-Sadr with 73 of the 329 members, resigned collectively on 12 June, having failed to form a coalition excluding the rival Iran-backed Shia Coordination Framework. The reordering of forces in parliament may enable government formation. However, Sadr retains considerable influence outside parliament and the underlying tensions that have hobbled Iraq’s politics will persist, including over Iranian influence and Kurdish oil autonomy.

Public grievances could boil over into broader social instability, as they did in 2019-2020, with protests ultimately leading to early elections. Iraq scores poorly across the World Bank’s governance indicators, reflecting insecurity and political instability, corruption, government ineffectiveness and weak institutions. Fitch Ratings expect persistently high levels of political risk and weak governance will continue to weigh on the sovereign rating.    https://www.iraqinews.com/iraq/iraqs-debt-set-to-fall-steeply-in-2022-fitch-ratings/

Oil Continues Its Losses

Economie  2022-07-21 | 04:08   459 views   Alsumaria News – Economy   Oil prices fell for the second session in a row, today, Thursday, as the impact of demand concerns outweighed concerns about the lack of global supplies after US government data revealed weak gasoline consumption in the peak summer travel season.

By 0618 GMT, Brent crude futures fell 33 cents, or 0.3 percent, to $106.59 a barrel, after falling 0.4 percent in the previous session.

West Texas Intermediate crude futures were down 48 cents, or 0.5%, at $99.40 a barrel, after falling 1.9% on Wednesday.

Oil prices remained volatile after traders were forced to prepare for a larger drop in global supplies due to the absence of Russian oil from the markets after Moscow's invasion of Ukraine, as well as fears of a recession that could weaken energy demand.

And government data revealed on Wednesday that US gasoline stocks increased by 3.5 million barrels last week, sharply exceeding analysts' expectations in a Reuters poll of an increase of 71 thousand barrels.

Concerns about Libyan supplies eased after the National Oil Corporation[/url] announced yesterday, Wednesday, the resumption of production in several oil fields after the lifting of force majeure on oil exports last week.   LINK

An Increase In The Exchange Rates Of The Dollar In Iraq

Economie   2022-07-21 | 03:29  867 views   Alsumaria News – Economy   Alsumaria News publishes the exchange rates of the dollar against the Iraqi dinar in the Iraqi local markets on Thursday.

The selling price of the dollar was 148,500 dinars per $100, while the purchase price of the dollar was 148,450 dinars per $100.   LINK

The Rise In The Exchange Rate Of The Dollar

Economie| 10:49 - 07/21/2022   Baghdad - Mawazine News, the dollar exchange rates rose slightly on the Iraqi Stock Exchange, today, Thursday.  And the selling prices of the dollar were 148,500 dinars per 100 dollars, while the purchase prices of the dollar were 148,450 dinars per 100 dollars.   https://www.mawazin.net/Details.aspx?jimare=199985

Oil Pumps Back "Improved" Gasoline To The Provinces

Economie| 09:30 - 07/21/2022   Baghdad - Mawazine News   directed the Ministry of Oil to reintroduce (improved) gasoline into fuel filling stations in all governorates.

The Assistant Director-General of the Oil Derivatives Distribution Department in the ministry, Ihsan Moussa Ghanem, said in a press statement that "the department directed this after its pumping stopped in the past few days in all governorates, except for Baghdad."

He added, "The ministry continues to support the prices of oil derivatives despite their rise globally after the repercussions of the recent war between Ukraine and Russia."

He pointed out that "the ministry's loss amounts to 3 trillion dinars annually to import what meets the actual need of oil derivatives for citizens, after the rise in the price of a barrel, according to the global bulletin." Ended 29 / M 99    https://www.mawazin.net/Details.aspx?jimare=199978

Governor Of Anbar Announces The Discovery Of New Oil Wells In Nukhaib And Tharthar

Economie| 03:26 - 20/07/2022   Baghdad - Mawazine News, Anbar Governor Ali Farhan announced today, Wednesday, the discovery of several new oil wells in Nukhaib and Tharthar.

Farhan said, "Tackling the problem of desertification in the province requires an international effort and support from the central government," noting that "Al-Anbar differs from other provinces by virtue of its vast desert areas."

Farhan added, "The General Secretariat, in cooperation with the Ministries of Environment and Agriculture, has projects and ideas to eliminate desertification in the province, and it is hoped that the government will allocate funds from the next budget for this regard," explaining, "The local government has studies, but the size of the problem is large and needs into huge sums of money with an international and regional effort.

Regarding the natural resources in Anbar, Farhan stressed that "the local government in Anbar worked to prepare the atmosphere for oil exploration and provided the security effort for companies in the province," expressing his hope that "the Ministry of Oil will take steps to complete oil explorations after canceling the contract with the Korean company."

And he stressed, "The local government is following up the exploration file with the Ministry of Oil and Saudi-American companies in partnership," noting that "many new oil wells have been discovered in Nukhaib and Tharthar, and the Ministry of Oil has the numbers for the new explored fields."

He continued, "The province contains large quantities of gas of an important quality," expressing his hope to "invest natural resources in the province to improve the economic reality and the reality of electricity through the investment of gas and oil fields."

He pointed out that "the local government in the province has taken actual steps to refer the phosphate fields to investment."

Regarding the factories suspended in the province, Farhan explained that "most of the factories and civil companies are suspended, but they are financed by the government and the general budget without production," noting that "these factories and companies need to legislate a law from Parliament and practical steps for investment."

Regarding the mechanism for distributing 1000 job grades in the governorate, between Farhan, that "committees have been formed in the administrative units, districts, and the governorate office to distribute grades according to the population ratio of each district, and the submission is done electronically to ensure that grades reach all areas in the governorate," noting that "the application mechanism will be according to Controls.    https://www.mawazin.net/Details.aspx?jimare=199910

Today.. Arab Ministers Are Discussing The Items Of The Upcoming Summit

Posted On 2022-07-21 By Sotaliraq    Cairo: Esraa Khalifa

With the participation of Iraq, the Arab Ministers of Trade and Economy will hold, today, Thursday, a meeting of the Arab Economic and Social Council to prepare for the economic and social file of the Arab Summit in its “31st” session, which will be held in Algeria next November, after an absence of two years due to the Corona pandemic.

The Director General of Foreign Economic Relations at the Ministry of Trade, Adel Al-Masoudi, told Al-Sabah: “The most important items that the ministers will discuss are supporting the Arab countries hosting Syrian refugees, completing the requirements of the Greater Arab Free Trade Organization, establishing the Arab Customs Union, as well as the Arab strategy for proper uses.

Atomic Energy, initiatives of a number of Member States and guidelines for better allocation of water for agriculture, the contribution of electronic payment, and a study was completed on the problem of the informal economy, innovation and Arab tourism.

He pointed out that “the social aspect in which the ministers will discuss many important topics, including the strategic framework for Arab social work, the Arab strategy to promote volunteer work, the strategy to advance women’s work within the framework of the Sustainable Development Goals 2030, as well as the Riyadh Declaration on the differentiated effects of the Covid-19 pandemic, to chart paths Recovery and support for vulnerable and fragile groups in epidemics and crises and the issue of recovery from Covid-19, and the continuation of the process of social and economic development, and the important challenges facing the Arab region.

He added that "Iraq will demand in the meeting to address the tax challenges arising from the digital economy and the item on the UAE initiative regarding the Arab vision of the digital economy.

Several Arab countries, including Iraq, have made great strides in this regard, and there are countries that signed bilateral, tripartite, regional and international agreements on digital foundations, creativity and innovation And digital governance, digital business and others, and it is possible to combine these two topics into one item called the digital economy, and it includes all the axes contained in these two items.”

Editing: Mustafa Ibrahim   Disclaimer: All published articles represent the opinion of its authors only    LINK

Cancer And Environmental Pollution Are Killing Southern Iraq

Posted On 2022-07-21 By Sotaliraq   Baghdad: Omar Abdul Latif   Despite the inclusion of legal clauses in the Iraqi oil contracts that compel companies operating in the south of the country, specifically in Basra, to provide treatment services to the residents of the areas where oil and gas is extracted and provide other services in millions of dollars, what the people of those areas with “radiant nights” earn from burning gas. From the oil fields, it is cancers of all kinds and the dangerous and deadly environmental pollution that turns their cities and villages into an unbearable hell.

The Oil, Gas and Natural Resources Committee in the House of Representatives is currently moving to implement the law and to compel foreign oil companies operating in Basra and the south to pay compensation to those affected by the extraction processes and improve the services provided to them, the first of which is health, treatment, environmental and other life services, but the file seems difficult and the task It is more difficult due to the existence of “suspicions” of corruption and local complicity with those extractive oil companies. The difficulty in this, according to the committee, lies in the presence of lines and networks that control these companies.

Deputy Chairman of the Committee, Ali Al-Machkoor, explained that "there has been a great legacy since 2007 until now, as the concerned authorities, whether the ministry or the competent committee, did not use their powers to serve the public interest of Iraq or at least the oil-producing provinces."

Al-Maskoor said, in an interview with “Al-Sabah”: “The oil committees in previous sessions neglected a very important aspect; Which is the pollution resulting from emissions or extracted oil, and for this reason we find many cases of cancer in those governorates that the previous committees did not mention in any decision or legislation,” noting that “the committee began communicating with companies to reduce pollution and set new standards.” .

The deputy pointed out that Parliament seeks to push oil companies to “allocate funds to treat those affected by the oil or gas extraction operations carried out by those companies within the producing provinces,” noting that “there are discussions to make it binding on all companies.”

Nevertheless, the deputy head of the committee notes the existence of networks and lines that seek to marginalize the supervisory role over oil companies, stressing the establishment of “mechanisms to dismantle these networks, whether they are parliamentary or otherwise, in order to do justice to the Iraqi product, companies and citizens in the face of unfair licensing rounds for the people and the squandered oil wealth.”

For his part, economic expert Abdul Rahman al-Mashhadani believes that “there are areas of corruption in the file of social benefits that prevent companies from deducting part of the revenues and profits to set up projects in the oil-producing governorates.”

Al-Mashhadani told "Al-Sabah": "The contracts concluded with the winning companies in the licensing rounds in 2010 included the allocation of $5 million from each company to provide services to the people of the productive provinces, such as health and entertainment centers, hospitals and educational institutions."

The expert indicated that the companies “were subjected to pressure and harassment from some corruption heads to refer these projects to them, which prompted the companies to refrain from establishing these projects because their reputation is too great for the corrupt to participate in this file.”

Al-Mashhadani added, "Part of these sums should be allocated to address the conditions of the unemployed in the governorates whose lands were seized by these companies, especially since the government promised them lands in other places and to appoint their children to those companies, but this did not materialize."

The economic expert described the issue of great pollution in those governorates as “important,” adding that “there is a thick cloud of black clouds hanging over the southern regions due to the burning of gas in those fields, which negatively affects their people.”

The expert recommended that the House of Representatives “follow up the issue carefully, while opening this file to serve the people of the productive provinces and the great damage they have suffered from the spread of cancerous diseases and environmental pollution.”

Editing: Ali Abdel Khaleq  Disclaimer: All published articles represent the opinion of its authors only   LINK