Oil in a Week (Iraq: Record Inflation)
Walid Khadduri Al-Hayat - 29/09/08//
In mid-September, Iraq's ministry of finance announced that the nation's budget for 2009 would reach a record figure of $78.88 billion, the highest in the history of the country when compared to an average of $17 billion in the late 1980s. The ministry speaker mentioned to news agencies that the budget was prepared on the basis of a targeted oil price of $80 per barrel next year. He also added that $60.26 billion would be allocated for operational expenditures, $18.62 for investment and infrastructure improvements. It is known that the primary reason for the growing budget is attributed to Iraq's rising oil revenues which constitute almost 90% of budget revenues.
Iraqi citizens are eagerly waiting for the government to actually start spending on the basis of people's needs after more than five years of occupation and with the relatively improving security situation in comparison to the past. However, there is a general feeling among the public that the lack of good government and the spread of corruption may result in wasting most of the funds such that they will not be used for the public good.
This huge budget raises questions in Congress as some congressmen demand that the US government cut its funds allocated for development and construction in Iraq given the increasing revenues of the Iraqi government from oil rents. They are also demand that the Iraqi government start funding some of its projects by itself. However, away from the budget numbers and oil rent, many economic concerns still bother the mind of Iraqis such as the rising inflation and the lack of essential services such as electricity, gas, and clean water.
As far as the high inflation is concerned, Iraqi economist Kamal al-Basri presented a valuable study to Deputy Prime Minister Barham Saleh whose most prominent figures and conclusions are presented here. According to al-Basri, major economic facilities broke down in 2003 and adds that inflation has been rising rapidly in the past four years. As a result, the consumer prices were up at the record rates of 33.6%, 26.9%, 36.9% and 53% for the years 2003, 2004, 2005 and 2006 respectively.
Al-Basri points out that the inflation rates in the US and Europe grew by 3% to 4% annually. In some rapidly growing economies such as China and India, inflation growth was about 8%. In Arab nations, inflation rates grew at a higher rate as in Egypt and Jordan (over 10%) and a few GCC states (about 14%).
*Energy Expert
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