Citigroup indicated that the Iraqi Cabinet ratified the 2013 draft budget that includes spending of 138 trillion Iraqi dinars ($118.3 billion) and revenues of IQD119 trillion ($102 billion), leading to a deficit of IQD19 trillion ($16.3 billion), equivalent to 13% of GDP. It said that the revenue figures are based on an average global oil price of $90 per barrel and exports of 2.9 million barrels of oil per day in 2013, including 250,000 barrels from the Kurdistan Regional Government.
But it estimated spending at IQD115 trillion ($98.6 billion) in 2013, equivalent to an execution rate of around 83% of budgeted expenditures, in line with historical averages. It forecast revenues at IQD118 trillion ($101.2 billion) in 2013, similar to the government's projections, but based them on a higher average oil price of $99 p/b and lower oil exports of 2.77 million barrels per day in 2013. As such, it projected Iraq's fiscal balance to post a surplus of 2% of GDP in 2013 relative to a forecast surplus of 5.7% of GDP in 2012.
Also, it expected Iraq's fiscal breakeven oil price to drop to $96.4 p/b in 2013 compared to $102.2 p/b in 2012 and $99.3 p/b in 2011. In parallel, Citigroup said that the government's recently announced $275bn five-year infrastructure investment plan reflects Iraq's significant infrastructure requirements.
It noted that the plan’s implementation requires capital spending of $55bn per year, equivalent to 50% of GDP. It considered that such spending would be difficult to achieve due to the government's limited implementation capacity, political gridlock, security issues, red tape and corruption. As a result, it forecast annual capital spending at around $35bn over the next five years.
Source: Citigroup – Byblos Research