Oil price drop forces government to tighten belt

 

By Kareem Abedzair

 

Azzaman, December 14, 2008

 

The drastic drop in oil prices has force the government to take austerity measures which are to slash its own post-war reconstruction schemes.

 

Finance Minister Baqer Soulagh is reported to have asked Iraqi ministries to slash spending and adopt belt-tightening measures.

 

There are fears that the government may not be able to cover the payrolls of its civil servants and pay for imports of food.

 

The country’s food rationing system which helps millions of Iraqi families make ends meet is under threat.

 

The food rationing systems costs up to $5 billion.

 

The government which had earlier drawn a budget depending on an oil price of nearly $80 a barrel is now reworking the budget on an estimated price of $26 a barrel.

 

Oil prices have dropped to nearly $45 dollars a barrel from highs hovering at $150.

 

The government had promised substantial raises for its civil servants and army and security personnel but Finance Ministry sources say there might be no salary hikes of nay kind.

 

Oil sales are currently the sole hard cash earner. In the absence of a functioning economy, the slump of oil prices is a painful blow to the government.

 

Iraq’s domestic industry is in shambles and the country now imports most of its needs for commodities and foodstuffs.