* Forecasts oil at $56, above current market price
* Seals oil-sharing deal with Kurdish region
* PM fears low oil revenue could hurt campaign against IS
(Adds official comments, details throughout)
By Saif Hameed
BAGHDAD, Jan 29 Iraq's parliament approved a
budget on Thursday worth 119 trillion Iraqi dinars (US$105
billion), made possible by improved ties between Baghdad and the
autonomous Kurdish region but constrained by plunging global oil
Passage represents a victory for Prime Minister Haider
al-Abadi, who fears lower oil revenues could hurt Iraq's
military campaign against Islamic State, which swept across
northern Iraq last summer, prompting U.S.-led air strikes.
The budget, revised to trim the expected price of oil to $56
a barrel, down from the $70 originally assumed, foresees a 25
trillion dinar deficit.
The adjusted oil forecast may have satisfied some MPs who
saw previous estimates as unrealistic, but others remain
"I don't know if they are deceiving themselves or the Iraqi
people by saying the price of oil is $56," MP Kadhim al-Saidi
told reporters before voting began.
Brent crude has been trading just below $50 this week, down
from $115 in June.
The budget seals a financial arrangement between Baghdad and
the Kurdish region that will see the Kurds export 300,000
barrels per day of oil from Kirkuk and 250,000 bpd from their
own fields in return for a 17 percent share of the budget.
Opponents decried the size of Kurdistan's share as unfair.
"There is no legal formulation or constitutional cover for
this agreement. It appears the political blocs ... robbed the
Iraqi people," said Saidi.
DIFFICULT TIMES AHEAD
For Abadi, the budget is a sign of growing goodwill between
Baghdad and the Kurdish region as they both fight Islamic State.
Kurdish peshmerga forces rolled back the radical jihdaists
after they surged across the Syrian border last summer,
threatening the regional capital Arbil.
But Islamic State, holding large swaths of Iraq's north and
west, remains a threat to the country's security and unity.
Defence alone is expected to take up 20 percent of 2015 budget
In addition, the state must ensure the payment of its civil
servants, with more than 5 million state employees. It is
withholding 15 percent of high-level government salaries, which
are meant to be paid back when the country is more financially
Nechirvan Barzani, prime minister of the Kurdish region,
praised the 2015 budget but pointed out the country remains in
dire financial straits.
"It is very good, but unfortunately (Baghdad) doesn't have
money," he told Reuters.
The government is expected to finance the deficit through
Treasury bills, government bonds and borrowing from local banks.
In addition, Iraq plans on drawing funds from the
International Monetary Fund through its Special Drawing Right,
and will introduce a tax on imported cars and cellular telephone
SIM cards and the Internet.
Kuwait has agreed to defer for one year Iraq's reparations
for its 1990 invasion of its neighbour.
($1 = 1,135.0000 Iraqi dinars)
(Additional reporting by Ned Parker and Stephen Kalin; Writing
by Stephen Kalin; Editing by Susan Fenton, Toni Reinhold)