As oil prices rise, Iraq nurtures budget hopes

BAGHDAD, June 8 (Reuters) - If oil prices continue to rise and Iraq's oil output and exports improve, the government may be able to pass a more generous supplementary budget later this year, Iraqi Prime Minister Nuri al-Maliki said on Monday.

Iraq, just emerging from years of sectarian war, had to chop its 2009 spending plans three times after global oil prices plunged from a peak last summer of more than $147 per barrel.

The final version, which involves $58.6 billion in spending, was dependent on average oil income of $50 per barrel and oil exports of 2 million barrels per day.

Iraq's oil exports crept marginally higher to 1.905 million barrels per day in May, and oil prices recently leaped to $70 per barrel.

Iraq earns less for its crude than world benchmark prices. On Monday, London Brent crude was priced at $68 per barrel.

Holding out financial hope to cash-strapped provincial officials, Maliki said local governments should make sure they spend their entire budgets in the meantime to make sure citizens could see progress in the provision of essential services.

"And God willing, improvements in oil prices and oil production and exports, might allow us, God willing, to present another supplementary budget, which may mean more money for the provinces," Maliki told a conference of regional officials.

Iraq's budget woes have hit at a sensitive time.

The bloodshed unleashed by the 2003 U.S. invasion has begun to recede but analysts warn violence could be stoked again by public frustration if the economy does not grow and the provision of basic services like electricity and water does not improve. (Reporting by Aseel Kami; Editing by Mike Peacock)