Oil Prices To Buoy Fiscal Accounts

The rise in international energy prices thus far in 2011 will have a positive impact on Iraq's fiscal accounts in our view, though we do not expect the deficit to turn into surplus as a result. Oil export receipts account for approximately 85% of fiscal revenues, and therefore the effect of elevated commodity prices and higher production levels will have a dramatic effect on the country's fiscal revenues. On the other hand, we expect government expenditures to accelerate markedly, and given our view that oil prices will likely moderate in H211, we expect the Iraqi budget to remain firmly in deficit for 2011.

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