* 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 (Reuters) - 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 prices.
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 critical.
“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.
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 expenditure.
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 stable.
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