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Iraq govt considers spending boost in 2007 budget
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Reuters AlertNet - [8/28/2006]
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Iraq's government is considering an expansive budget for next year to stimulate its ravaged economy in a finance bill that should go to parliament by the end of next month, a senior government official said.
Deputy Prime Minister Barham Salih, who oversees economic affairs, told Reuters he and others were pushing for a less cautious view of revenues than those projected by the Finance Ministry and said capacity for spending was improving after a hiatus during the lengthy formation of the government this year.
"The Finance Ministry is erring on the side of caution in terms of budget revenue projections," he said late on Saturday.
"There are those of us in cabinet, including myself, who believe that the projections are too conservative. Iraq needs a budget that should be more ambitious and we need to stimulate the economy by providing the funds necessary for investment in key areas of services and infrastructure.
"I expect that this budget will be crucial to Iraq and should demonstrate to the Iraqi public and to the international community the seriousness of the government of Iraq to utilise effectively the resources available to us."
Fostering economic growth at a time when unemployment is calculated at 50 percent and inflation has accelerated to 70 percent presents a major challenge for the government, but Salih said economic development was a vital component of efforts to stabilise Iraq and reduce frictions among various communities.
He said a final budget would probably take longer than a couple of weeks but that the government was conscious of its constitutional obligation to present a bill to parliament by the end of September.
SPENDING INCREASE
Despite sabotage and crumbling infrastructure capacity, Iraq's revenues have been increasing as oil exports grow and oil prices rise, making expenditure rather than income the main problem for the government in carrying out its budget plans.
Salih said the lack of a functioning government for the first five months of this year following December's election had been the main difficulty and spending was now picking up -- though he declined to say how much of budgeted 2006 expenditure had now been implemented.
"We are working hard at developing capacity, certainly at local levels, for the implementation of budget programmes," he said.
"Budget execution was significantly short of where we hoped it would be but that was in large measure because the government formation took longer than expected.
"But over the last month or so we have seen an increased level of expenditure," he added, citing as an example that the regional development fund had now spent 40 percent of its annual budget, compared to just 10 percent a month ago.
Salih said the government was intent on trying to help the poorest Iraqis survive the sharp increases in the cost of living while staying within its obligations under a standby agreement with the International Monetary Fund, under which it is obliged gradually to reduce huge subsidies on fuel prices.
"Obviously much of the inflationary pressure is coming from rising fuel prices," he said. "There are serious plans under consideration to help certainly the poor segments of society to deal with these inflationary pressures.
"We are mindful of enhancing the social safety net programmes that we have and to make it a targeted system as opposed to a universal welfare system ... that the state cannot afford. Consistent with our obligations under the standby agreement with the IMF I think we will be able to develop modalities."
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