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Iraq’s Fiscal Break-Even Oil Price to Reach $94 in 2024

The International Monetary Fund (IMF) has projected that Iraq’s fiscal break-even oil price will reach $94 per barrel in 2024, up from $54 in 2021. This increase is attributed to higher expenditures, lower oil production, and currency revaluation.

Government Debt Projections

According to the IMF, Iraq’s government debt is expected to surge from 44% of GDP at end-2023 to more than 86% by 2029, resulting in a high mechanical risk signal for sovereign stress in the medium term. To stabilize debt and rebuild fiscal buffers, Iraq needs an ambitious adjustment.

Fiscal Adjustment Recommendations

The IMF has recommended a combination of measures to achieve this goal, including:

  • Seeking savings on the wage bill through a gradual phase-out of mandatory hiring requirements and an attrition-based strategy to right-size public employment.
  • Mobilizing additional non-oil revenues through:
    • Removing tax exemptions for profitable state-owned enterprises
    • Payroll tax reform
    • Reviewing customs duties in the near-term

Protecting Capital Investment and Targeted Social Transfers

The IMF has also emphasized the need to protect capital investment and possibly expand targeted social transfers while achieving fiscal adjustment.

Iraq’s Medium-Term Fiscal Accounts

Iraq’s medium-term central government fiscal accounts project revenues at:

  • $42.6 billion in 2023
  • $40.1 billion in 2024
  • Decreasing to $33.5 billion by 2029

Expenditures are projected to increase from:

  • $43.9 billion in 2023 to $47.7 billion in 2024
  • Slightly decreasing to $46.2 billion by 2029

Fiscal Discipline for Economic Stability and Growth

The IMF’s projection highlights the importance of fiscal discipline for Iraq’s economic stability and growth prospects. The country needs to implement reforms to boost its non-oil revenue and reduce its dependence on oil exports to ensure long-term sustainability.

“The recommended adjustment is ambitious relative to Iraq’s recent past, but broadly in line with some adjustment episodes of other oil exporters,” said an IMF spokesperson.