By Furkan Naci Top
ISTANBUL
The head of Iraq's Central Bank has said his country will fight the slump in oil prices by substantially increasing production, despite Iraq’s ongoing security vacuum.
Iraq, mostly dependent on oil revenues to fund its struggling economy, has seen a stunning expansion of the Sunni insurgent Islamic State of Iraq and the Levant group when it captured the second-biggest city, Mosul, in June.
On top of that, Brent crude oil prices have slumped by some 45 percent to $63 per barrel since its peak six months ago, $115.
Speaking to AA in Istanbul earlier this week, Ali Mohsin Ismail al-Alaq, the governor of the Central Bank of Iraq since this September, said: "After 2015, there will be a further substantial increase in oil production due to contracts with oil companies."
Iraq plans to take up its oil production to 4 million barrels per day, from its current level of over 3 million barrels daily. It has already increased its oil output by 500,000 barrels since the end of 2011 despite ongoing violence in the country.
According to an interim agreement among OPEC countries, Iraq still keeps the right to increase its production and share in global oil markets, the governor said, unlike some countries which have reached their upmost limit.
On Tuesday, the International Monetary Fund said in its global outlook report that the Iraqi economy would shrink by 0.5 percent, a better picture than its October report where it said the contraction would stand at 2.7 percent.
"2015 will be an exceptional year because of the decrease in oil prices and terrorist activities in our country," said al-Alaq. "But for the year 2016, growth will be upwards again," he predicted.
Iraq's central authorities has also signed a deal with the autonomous Kurdish Regional Government in November, which aimed to end a dispute over oil revenues. The Kurdish authorities had started to export oil through Turkey, angering the Iraqi government which cut its share of Kurdish funding from national oil revenues.
Al-Alaq said this deal with the KRG has been a very positive step and IMF officers took this development into account in their considerations.
He does not also believe the oil prices will go lower than $50 per barrel, although multinational investment bank Morgan Stanley has predicted that the tumble will continue to $43 per barrel, in a recent report.
The threat from ISIL, which controls a major part of the country despite strikes by a coalition led by the U.S. to hamper its activities, is still ongoing.
According to the governor, the high cost of fighting ISIL and compensating for damages they have done to the country’s economy is counted in billions of dollars.
"We expect the cost to be $4-5 billion just to cover the compensation for our citizens so far," al-Alaq said, referring to Iraq's funding to repair damage in urban areas and support its people.
www.aa.com.tr/en
