Iraqi economy faces 'difficult' 2010 on oil price drop, says official

Bahrain: Iraq's economy has been hit by plummeting oil prices and 2010 will be a "difficult" year for balancing the budget, said Deputy Prime Minister Barham Saleh.

"The decline in oil prices has serious implications on the Iraqi economy," Saleh said during a security conference in Bahrain on Saturday. "This has impacted our budget."

Crude has slumped 69 per cent to about $46 from an all-time high of $147.27 in the summer.

Iraq's economy is inherently linked to the oil price as the commodity represents 95 percent of the country's exports and the nation's southern oil terminals alone account for more than 80 percent of government revenue.

"Last year and the year before we had added revenues because of the higher oil prices," Saleh said. "We are somewhat safe for 2009 because we have a surplus."

The global financial crisis and a low crude price should add "urgency" to reforming the Iraqi oil sector, Saleh said.

The government also needs to use 2009 to diversify its economy away from oil, he added.