EconSource: Iraq to Adjust 2016 Military Spending in Line with Budget Cuts

A financial squeeze is forcing Iraq to put major weapons deals on hold, but the country will hire 10,000 additional paramilitary forces in order to combat the Islamic State (ISIS or ISIL), Finance Minister Hoshiyar Zebari said Wednesday. Baghdad will focus its military spending in 2016 on light and medium weapons such as sniper rifles, anti-mining devices, and surveillance equipment rather than heavier weapons like artillery. Zebari said about 20 percent of Iraq’s 2016 budget will go to defense, including the paramilitary forces fighting ISIS. Spending on the forces will be less than the $1 billion allocated for this year, in line with broader budget cuts. “I think we gave [the forces] … about 10,000 new recruits, which they have requested, but they have their budget within the security forces,” Zebari said. “We will pay their salaries, we pay for their equipment, we pay for their basic war needs.” He also expects Baghdad to spend only about 60 percent of its 2015 budget by the end of 2015 because of cuts in operational and investment spending. [Reuters, 10/28/2015]

Tunisia’s Central Bank cuts key interest rate
Tunisia’s Central Bank said on Thursday it had cut its main interest rate to 4.25 percent from 4.75 percent to boost economic growth as inflation rates fell. This marks the first time the bank cut its benchmark interest rates since 2011. The bank said its decision was aimed to “help the promotion of investment and the resumption of economic activity.” The bank also said that 2016 will be a year of economic recovery. Tunisia will start talks with the International Monetary Fund (IMF) in December or January for a new credit program worth about $2 billion, Finance Minister Slim Chaker said this week. A $1.6 billion standby arrangement with the IMF is due to expire at the end of this year. [Bloomberg, Reuters, 10/29/2015]

Algeria will move to free private sector, but slowly
Algeria will take steps to free up its private sector in response to a plunge in energy revenues, but change is expected to be slow due to an entrenched government bureaucracy, former Presidential Adviser Abdelmalek Serrai said. “[Algeria’s] economic model will change in the short run because of the [energy] crisis, but things will move slowly,” he said. The government is restricting import licenses, plans to impose customs duties on some imported products, and is encouraging increases in local production to stabilize the country’s trade balance. But officials say for local industries to grow rapidly, the private sector needs to get involved, which will require liberating it from oppressive regulation and red tape. “There is political will to improve things,” said Serrai. “There have been good indications. The government this year allowed the private sector to set up and run industrial estates for the first time. This was a taboo. I think the government is willing to go further.” [Reuters, 10/29/2015]

Zohr discovery to make Egypt’s status as LNG importer short-lived
The huge Zohr natural gas field discovered by Italy’s Eni off the coast of Egypt could reverse the country’s status as an importer of liquefied natural gas (LNG). Egypt entered the LNG market with a burst of imports earlier this year after leasing a floating storage and regasification unit from Norway’s Hoegh LNG for five years in April. Eni’s discovery, which came at the end of August, could turn Egypt into a net exporter. “We felt comfortable in Egypt’s demand for LNG over a five-year period and we still feel that there’s a good chance Hoegh will serve for longer, but it all depends on how quickly local reserves are developed,” said Chief Executive of Hoegh LNG Partners Richard Tyrrell said. Offshore gas fields typically take several years to come on stream, but Egypt already has some of the infrastructure in place, which could accelerate the process. A source at Egypt’s Ministry of Petroleum said the government expects production at Zohr to begin at some point in 2018. The ministry said Egypt aims to cease importing LNG by 2020. Meanwhile, Egypt’s cabinet approved a law regulating the natural gas market that establishes a new authority to oversee the market. [Reuters, 10/29/2015]

Kuwait defers Iraq’s final war reparation payment until 2017
Kuwait has postponed the final installment of reparations for Iraq’s 1990-1991 occupation following a request from Iraq, Iraqi Finance Minister Hoshiyar Zebari said on Thursday. The delay gives Iraq until 2017 to pay the last and largest tranche worth $4.6 billion. More than a million claimants have been paid and nearly all the $52.4 billion reparations bill has been met through Iraq’s annual allocation of 5 percent of crude oil exports to a UN body tasked with overseeing the compensation. But with the economy now under pressure, Iraq cannot afford to divert a large chunk of its budget to make the final payment, which was due this year after an earlier postponement. [Reuters, 10/29/2015]

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Iran eyes Iraq trade decades after war | FT
Finance minister calls on Tunisian businesses to invest inland | TAP
Finance minister says Tunisia will not increase electricity prices in 2016 | TAP