Thread by @AMTabaqchali

"Up #debt creek without a paddle"
#Iraq's budget’s structural imbalance between current & investment expenditures, as ever-increasing current expenditures will overtake revenues, needs debt to fund this gap.

Data in chart: 2010-2024 IMF estimates & projections.

1/10

#Iraq has been fortunate that higher oil prices & exports led to a budget surplus of over $27.5bn by end of Jul 2019. Revenue-expenditure gap is pushed forward in time. But, it is only a matter of when, not if, expenditures will overtake revenues.

https://twitter.com/AMTabaqchali/status/1181559159453564928?s=20

2/10

This structural imbalance needs time be addressed, in the meantime there will be an urgent need to finance both.

The social contract, re-public employment, cannot be broken without creating the conditions for private sector growth to absorb an ever-growing labour force.

3/10

#Iraq has the resources to fund “The Reconstruction & Development Framework” presented in Kuwait Conference Feb2018

The framework has short, med, & long-term plans to meet needs in all economic sectors. A big+ for private sector growth.

P 8 & 9:
auis.edu.krd/iris/latest-ir…

4/10

Now is the time for a debt management program to plan for the upcoming financing need. #Iraq’s current debt profile is very manageable as outlined in my piece.

bayancenter.org/en/2018/08/159…

It got better as IMF est's 2019 debt at $115bn, of which $72bn is external.

5/10

#Iraq’s credit rating is worse than it should be, due to many factors, but the budget’s structural imbalance is an important one. Making matters worse is the government’s response to the IMF, which noted: ...

6/10

... “The authorities were unconvinced of the urgent need to modify fiscal policy settings. They cited higher oil prices as well as their track record of under executing the budget as likely sources for budgetary savings in the near term.”

7/10

Without planning, when #Iraq needs to borrow it will meet a sceptical debt market that would demand a high price to finance its needs. It would be forced to draw on reserves, just as in 2014-2016, which would affect the IQD vs $ when reserves drop significantly.

8/10

IMF proposed (1) Creating a fiscal buffer to allow Iraq to deal with an oil price shock (2) Creating space for investment spending, tailored to #Iraq’s capacity challenges, for investment spending to gradually increase as % of budget, as structural reforms will take time.

9/10

This proposal can fix credit rating issues.

But, this like all other such past proposals, risks staying as just a proposal, as the urgency of these issues is entirely absent in #Iraq's government planning & in parliamentary discussions.

10/10

@threadreaderapp #unroll