Falling oil prices are a threat to Iraq’s fragile economy, economists warned Anadolu Agency on Wednesday.
If the price of oil falls below $45 a barrel, the impact on the country’s revenues could plunge an economy already struggling to cope further towards crisis.
"The war against terrorism, political issues and financial and administrative corruption since 2003 have led to an economic crisis," analyst Majid al-Suwari said.
Administrative mismanagement and security issues have seen around 6,000 investment projects put on hold recently, he added. Corruption has further throttled the development of the private sector.
"If the price of oil falls below $45 per barrel, Iraq will have very difficult times in the next few months,” Suwari told Anadolu Agency. “The country needs to undertake austerity policies and to minimize the salaries of high-ranking officials to relieve the burden on the budget.”
Iraq's Council of Ministers decided on July 21 to halve the salaries of government, parliamentary and presidential officials.
"This year's budget will not have much difficulty in paying the salaries of public employees,” Mithaq al-Hamidi, who sits on parliament's economy and investment committee, said.
“However, if we don't implement serious and rational economic plans, next year will be highly costly for Iraqi citizens.”
Most of Iraq’s budget depends on income from oil sales, which will leave Iraq facing a bigger economic crisis in 2016 if the price falls.
"Loss of value in the Iraqi dinar and falling oil prices have caused a shaky economy,” Hamidi told Anadolu Angency. “We don't have any incomes besides oil exports, while corruption is on the rise.”
He called for the government to encourage private sector activity through new economic options and incentives while focusing on strong investment.
Abbas Sammari, a building contractor, said the economic crisis had a huge effect on projects that were dependent on international investment.
“The private sector has been affected 100 percent by the crisis,” he said. “If this situation is prolonged, the industrial sector will take a big hit and Iraq will face its worst economic crisis in six months.”
He added: “The previous Iraqi economic crisis during the Gulf and Iran-Iraq wars were solved through exporting oil or establishing trade ties. But this crisis is complicated enough in not being able to be resolved by the methods available at the moment.”
Iraq produced 4 million barrels of crude oil per day in June, a 23 percent increase on the 2014 average of 3.3 million barrels a day.
Oil prices fell around 60 percent between June 2014 and January 2015. Although they have begun a slow recovery since, they recently fell due to the slowdown in China's economy and the rising value of the US dollar.
On Monday, the global benchmark Brent crude oil price fell below $50 per barrel.
© Copyright Andolu Ajansi