Shafaq News- Baghdad
Iraq’s public financesare facing a liquidity crisis due to declining oil revenues linked to theStrait of Hormuz crisis, a financial advisor of the Iraqi PM told Shafaq Newson Monday.
According to theadvisor Mudher Saleh, monthly public revenues may not exceed four trillionIraqi dinars (about $2.61B), compared to operational expenditures estimated ataround eight trillion dinars, including salaries, pensions, and social welfarepayments. The current situation reflects a short-term liquidity issue caused bya mismatch between incoming cash flows and fixed financial obligations, ratherthan a structural weakness in the state’s financial capacity.
He said the firstoption involves resorting to domestic financing by issuing short-termgovernment debt instruments and activating open market operations incoordination with the Central Bank to provide immediate liquidity, noting that“such measures could generate inflationary pressures and risks to the exchangerate if not carefully managed.” The second option is external borrowing throughinternational financial institutions or global capital markets by issuingsovereign bonds or securing loans, “which could support foreign reserves andstrengthen the Iraqi dinar, though it may come with reform conditions.”
“Iraq is likely toadopt a combination of rapid domestic financing to cover immediate needs,followed by external borrowing to reinforce financial stability over the mediumterm,” he stated, pointing out that the success of this approach depends oncontrolling public spending, improving non-oil revenues, maintaining exchangerate stability, and restoring optimal oil export capacity.
Saleh indicated theStrait of Hormuz crisis “has underscored Iraq’s vulnerability due to itsreliance on oil revenues and highlighted the need to build more flexible andsustainable financial tools.”
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