Iraq is set to approve its largest ever budget at ID138.4 trillion ($118.3bn) for 2013, up more than 18 per cent on 2012, and more than 70 per cent of the country’s gross domestic product (GDP).

The new budget which is yet to be approved by parliament is almost double the size of the budget seen in 2009.

Spending on the energy sector makes up the largest portion of the budget at 21 per cent, followed by 14 per cent for defence and security and 13 per cent for social services, according to the UN’s Joint Analysis Policy Unit (JAPU) in a background paper published on 24 January.

The government’s budgeted revenues amount to ID119.3 trillion, with ID111.1 trillion, or 93 per cent, of this coming from oil exports. Iraq’s oil revenues have more than doubled since 2009, reaching a record of $94bn in 2012.

Iraq budgeted revnues
Year Total revenue ($bn)
2009 43.34
2010 53.05
2011 69.56
2012 87.96
2013 102.58
Source: JAPU  

The budget is based on a crude oil price of $90 a barrel and average exports 2.9 million barrels a day (b/d). This will leave a deficit of ID19.1 trillion to be financed largely by funds retained from the 2012 budget, which JAPU estimates at ID5 trillion-7 trillion, along with ID6 trillion in loans from the Washington-headquartered IMF and the World Bank.

Of the total, ID138.4 trillion expenditure, operating expenses will account for ID83.3 trillion, while investment expenditure will make up ID55.1 trillion.

“Financial reserves can cover government operating expenditure for less than year. In order to improve Iraq financial resilience and reserves in the short run, Iraq needs, in addition to its plan to increase oil revenues, to increase non-oil revenues … and to rationalise operating expenditure,” says the report.

JAPU continues that the government’s budget contribution to Iraq’s development on the ground is undermined by insufficient funds and “inadequate operationalisation of pertinent approved funds”.

The example cited is the meager $24.8bn budget allocated to cover education, health and environment, culture and youth, and water and sanitation. This is less than the allocation for energy sector investment alone.

In addition to their relatively small allocation, the sectors also suffer from poor rates of execution for their funds, averaging only 30 per cent. The energy sector by contrast, has an execution rate of 93 per cent.

Iraq 2013 budget allocations
Sector ID trillion
Construction and housing 1.6
Industry 1.7
Transport and communication 1.8
Culture and youth 2.3
Agriculture 2.7
Water and sanitation 4.2
Health and environment 6.8
Education 12.8
Central and local directorates 12.8
Kurdistan Regional Government 14.4
Social services 17.7
Security and defence 19.7
Energy 29.5
Source: JAPU