Salaries at risk: Iraqi expert warns of economic impact if oil hits $70

Shafaq News/ On Saturday, Iraqi economist Nabil Al-Marsoumi confirmed that a drop in the price of Iraqi crude oil to $70 per barrel would have severe negative effects on the national economy.

Al-Marsoumi stated, “With oil prices falling and oil exports declining to 3.3 million barrels per day, monthly oil revenues would drop to 9 trillion dinars, of which one trillion would cover the costs of oil licensing companies, leaving just 8 trillion dinars to finance various salaries totaling 7.5 trillion dinars monthly.”

“Half a trillion dinars would be allocated to fund the ration cards, with remaining operational and investment expenses being covered by scarce non-oil revenues, in addition to domestic and external borrowing,” he added.

Furthermore, Al-Marsoumi predicted that “taxes, fees and debt would rise, and foreign reserves in the Central Bank of Iraq (CBI) would face significant pressure, particularly in the absence of a sovereign wealth fund.

He also noted, “The Ministry of Finance might struggle to fund salaries in the next two months, potentially leading to delays or reductions in salaries if the barrel price remains in the $70 range for six months.”

Last week, Basra heavy and medium crude oil experienced significant weekly losses, with prices dropping by 7.90% and 7.60%, respectively. Basra heavy closed at $68.76, up 40 cents, while Basra medium closed at $71.76, with a similar increase.

Global oil prices also saw sharp weekly losses, with West Texas Intermediate falling by 7.9% and Brent crude by over 7.6%, amid anticipation of OPEC+ decisions.

Iraq's economy, heavily reliant on oil revenues, faces significant challenges due to fluctuations in oil prices. Economists and the Parliamentary Finance Committee cautioned that prolonged low oil prices could exacerbate the budget deficit and impact investment and operational budgets.

Additionally, experts highlighted the need for economic diversification and alternative revenue sources to address the effects of oil price volatility. The role of OPEC+ in stabilizing oil prices is considered crucial for maintaining Iraq’s revenue and budget stability.

1 IQD equals $0.00076.