Iraq has decided to issue $5 billion in international bonds and is negotiating the terms, Iraqi Finance Minister Hoshyar Zebari said on Wednesday, one of several measures as it seeks to relieve the pressure of low oil prices on its finances.
At a meeting with reporters in Washington, Zebari said Iraq was negotiating with Citigroup Inc's Citibank and Deutsche Bank. "We are meeting them here in Washington, but we have a green light from the government that we need that."
He declined to say what maturity and interest rates were being negotiated for the bonds.
Cheap oil is ravaging Iraq's state finances, just as the government faces rising military spending from the war it is waging against Islamic State militants. Zebari said the government was facing a budget deficit of $25 billion, out of a budget of approximately $100 billion. Iraq's 2015 budget is based on an oil price of $56 per barrel, he said.
Oil prices have halved from $115 a barrel in June 2014 due to ample supply in a decline that deepened after the Organization of the Petroleum Exporting Countries chose to defend market share rather than cut output. Iraq is OPEC's No. 2 producer.
Iraq's oil minister said on Wednesday his country's oil exports should hit a record of about 3.1 million barrels per day in April, but even so the exports are still below the 3.3 million bpd target in Baghdad's 2015 budget.
Iraq is considering a number of other measures to cover its budget deficit, including asking the International Monetary Fund for relief funding of between $400 million and $700 million, Zebari said.
"We haven't made a decision, but I think they (the IMF) are willing to provide that support, but they need the government to do more cuts on the public spending," he said. "Not as a precondition, but really they have advised that is the way to release these funds."
Iraq is also requesting the U.S. Export-Import Bank finance the purchase of 10 planes from Boeing Co, which cost the government $500 million, Zebari said.
"We are seeking to finance those planes ... through the Ex-Im Bank, and they (Boeing) will pay us back the money we have paid already," Zebari said.
Iraq has also been building up debts to the companies developing its oilfields. Zebari saidIraq had started paying back its debts to the international oil companies, but declined to say how much.
"We are paying them actually, not according to their expectation but at least we started paying them," he said.
The government has also managed to borrow some $7 billion from semi-state-owned Iraqi banks to cover its shortfall, Zebari said.
Though Iraq's finances are no longer in a panic state, Zebari said, fundamental changes are needed to ensure Iraq's economic health in the future, including reforming a bloated government bureaucracy that he said employs some four million Iraqis at a cost of $3.5 billion per month for wages.
"This rentier state government has been overburdened by this social commitment ... to a large section of the population," he said.