Iraqi parliament approves emergency funding bill to tackle shrinking revenues

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Iraqi lawmakers on Thursday passed an emergency spending bill to allow the cash-strapped government to borrow abroad as the economy reels from low oil prices, although they approved less than a third of the original amount requested.

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Under the new law, the finance ministry will be allowed to borrow $10.1 billion from international markets and local banks, much less than the $35 billion originally sought by the government.

Due to infighting, parliament has failed to approve a budget draft for 2020, and the urgently passed bill will only secure enough funds to get the government to the end of the year.

Iraq’s commitment to the OPEC+ deal on reducing oil output has squeezed the country’s finances, challenging a government struggling to tackle the fallout from years of war and rampant corruption. Iraq relies on oil to fund 97 percent of its state budget.

The secured funds will mainly cover public servants’ salaries, food imports and crucial projects, according to a copy of the law seen by Reuters.

Differences emerged during Thursday’s vote after Kurds objected to passing an article binding the Kurdish Regional Government to hand over revenues generated from regional oil exports as a condition for receiving its monthly share from the new funding plan.

Kurdish lawmakers say their share should not be linked to unresolved oil issues between Baghdad and their region. But legislators, mainly from the Shiite blocs and some Sunni lawmakers, insist that the Kurds should only receive their part of the emergency funding if they hand over their oil revenue to Baghdad.

Most of the Kurdish lawmakers walked out of the voting session, lawmakers said.

The World Bank estimates Iraq’s economy will shrink 9.7 percent in 2020 due to lower oil prices and the coronavirus pandemic, following growth of 4.4 percent in 2019.

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