Iraq slashes 2009 budget amid low oil prices

BUDGET CUT: Officials in Baghdad has made its second cut to the draft budget in just three months. (Getty Images)

Iraq's cabinet has slashed its draft 2009 budget, the second time in three months that plummeting oil prices have forced it to chop spending when it desperately needs funds to recover from war.

Immigration minister Abdul Samad Sultan told Reuters the revised budget envisioned $62 billion in spending - more than 22 percent lower than the $80 billion initially agreed last year, which was revised down to $67 billion in November.

A government statement said only that the revised budget had been approved, but did not give figures.

Sultan, who attended the cabinet meeting where the budget was approved, told Reuters the 72.9 trillion Iraqi dinar budget assumed an average oil price of $50 a barrel in 2009, down from $62 in the November revision and $80 in the original draft.

Oil provides nearly all of Iraq's government revenue, and the fall in international oil prices by two thirds from a peak of $147 over the last six months has hurt the country's finances at a time when it desperately needs to finance reconstruction.

Exports have also fallen to about 1.7 million barrels per day from a peak of 2 million in mid 2008 as a result of run-down infrastructure. Oil officials say Iraq must boost export volume in order to meet its targets.

The immigration minister said the 2009 budget would include just 14 trillion dinars ($12 billion) of investment, down from 17 trillion in the November draft.

Iraq, with the world's third largest crude reserves, has slowly begun to open its oil industry to international companies, offering some of its largest fields to tenders last year in an effort to quickly boost production. (Reuters)

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