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Traders monitor stocks in the Iraqi Stock Exchange (ISX) in this file photo.

Budget cuts will affect every aspect of Iraqi government, from the Council of Ministers to hiring new employees to buying new vehicles.

As a result of significant declines in oil prices in world markets and its huge negative influence on the oil-dependent Iraqi government's revenues, the Ministry of Finance has decided to reduce government expenditures in 2009. The decision came after the preparation of 2009's budget, which is much less than the previous year's budget. Therefore, the government was left with no choice but to make cuts.

According to Dr. Fazil Nabi, Deputy Minister of Finance, expenditures such as buying vehicles, equipment, wage increases, new employment, social transfers, and council benefits, that is, Presidential Council, Council of Ministers, and Council of Representative will all be cut.

However, some Parliament members think that the cuts are out of balance in the councils. In an interview with a local media organization, Dr. Mahmoud Osman, an independent Kurdish Parliament member, said the cut in the Presidency Council's budget is far more than the cut in the Council of Ministers' budget.

Another criticism of the 2009 budget, which has been approved by the Council of Ministers and is under discussion in Parliament for final approval, is the salary of high-ranking employees. "The salary of high-ranking employees should be reduced, since their salaries are very high compared to lower-level employees' salaries," said Dr. Osman. He added that the Representative Council members have many comments about the 2009 draft budget, and they think that it should be returned to the Council of Ministers for amendments before approval.

Earlier, Dr. Nabi had announced that his ministry would try not to cut public employees' wages, but rather would cut from the investment budget as well as the budgets of the ministers and other government institutions.

According to the estimations of the Finance Minister, after all the cuts in expenditures, Iraq will run a deficit of approximately 22,508,629,000,000 Iraqi Dinars (approximately US$19 billion). However, a significant amount of this deficit will be covered by the available reserve in the Central Bank, most of which remained from the last year's budget.

Iraq's 2008 budget was the largest ever in the history of the country thanks to the record-breaking increase in oil prices in the world market. Oil prices constitute around 80 percent of the country's total revenues. Nevertheless, this increase was followed by an even sharper price fall, and now the country is left with no choice other than to cut expenditures.

One of the main components of the Iraqi government's expenditures is the wages of government employees, which was further increased last year as the country's budget reached its climax. This increase came after a decision by Deputy Prime Minister Dr. Barham Salih, who vowed to improve living standards for Iraqis. However, as the salary expenses rose last year due to that decision, the Finance Ministry decided to hold up the payment of part of the increase to 2009. This decision further increased the burden on the 2009 budget.