The Iraqi budget since 2003: Was the problem the amount of money or the way it was managed?
The Iraqi budget since 2003: Was the problem the amount of money or the way it was managed?
7-4-2026
Researcher Shatha Khalil
The national budget is a true reflection of a country’s economic policies. It not only reflects the size of revenues and expenditures but also reveals the level of transparency, the efficiency of public finance management, and the extent to which governments adhere to the principles of accountability and good governance. In rentier economies, such as Iraq, the budget acquires even greater importance because it represents the primary instrument for transforming oil wealth into development projects and investments capable of achieving sustainable growth.
Although the Iraqi Financial Management Law No. (6) of 2019 enshrined the principle of transparency and mandated the publication of financial data according to international standards, numerous international reports, most notably the Open Budget Survey, still indicate challenges related to the availability of financial information, citizen participation in monitoring public spending, and the level of transparency in public finance management. The importance of these indicators extends beyond legal aspects, impacting investor confidence, institutional efficiency, and the state’s ability to achieve sustainable development.
Despite possessing one of the world’s largest oil reserves, the Iraqi economy faces significant challenges. It remains heavily reliant on oil revenues, while state institutions suffer from administrative corruption, weak economic diversification, and declining public trust in the banking sector, in addition to the impact of political and regional conflicts. Since 2003, public budgets have witnessed unprecedented growth, but this fiscal expansion has not always translated into sustainable development, improved infrastructure, or a more diversified economy.
Therefore, an analysis of the Iraqi budget should not be limited to the size of allocated funds or expenditure figures, but should extend to evaluating how these resources are managed, their capacity to achieve development, promote investment, improve public services, and build more efficient and transparent financial institutions. From this perspective, this article attempts to analyze the evolution of Iraqi budgets since 2003, examining what the figures reveal about the reality of the Iraqi economy, the reasons for the gap between the vast financial resources and the level of development, and the opportunities for financial and institutional reform in the coming period. Iraq is one of the world’s richest countries in terms of oil resources, possessing the fifth largest proven oil reserves globally. This has provided the state with enormous financial revenues over the past two decades, resulting in an unprecedented increase in the size of public budgets. However, this financial abundance has not been reflected to the same extent in economic development, the quality of services, or economic diversification. This raises a fundamental question: Was the problem the limited resources, or the way these resources were managed?
In 2003, the Iraqi budget reached approximately $6.1 billion, marking the first budget after the fall of the previous regime. Within just a few years, budgets gradually increased with improved oil production and rising prices, averaging between $50 and $70 billion between 2004 and 2010.
As oil prices continued to rise, the budget exceeded $82 billion in 2011, then $100 billion in 2012, and rose to more than $118 billion in 2013. The 2014 budget was about $150 billion, but it was not approved due to the security and political crisis that accompanied the invasion of a number of provinces by ISIS.
In subsequent years, budgets declined to between $80 and $100 billion as a result of the war against ISIS and the drop in global oil prices, before gradually rising again, reaching about $135 billion annually in the three-year budget for the years 2023–2025, the largest in the history of modern Iraq.
These figures show that the size of government spending has increased more than 22 times compared to 2003, an exceptional financial expansion that reflects the size of the oil revenues that entered the state treasury during the past two decades.
Oil… the primary driver of the budget
The Iraqi budgets reveal a clear economic fact: oil has remained the main source of public revenue, accounting for more than 90% of the state’s income in most years.
This means that the expansion of the budget was not a result of the growth of other productive sectors, such as industry, agriculture, tourism or technology, but came mostly as a result of rising oil prices and increased oil exports.
Consequently, Iraqi fiscal policy has become directly linked to global energy markets; when oil prices rise, the budget expands, and when they fall, financial pressures begin to appear, whether on investment spending or even on operational spending.
The crises revealed the fragility of the economic model.
The years 2014, 2020, and 2022 reveal another aspect of the Iraqi financial landscape. In these years, full budgets were not approved, and the state was forced to adopt a spending rule of 1/12 of the previous year’s budget to cover basic expenditures.
This is not merely an accounting procedure, but reflects the limited ability of the financial system to plan for the long term in the face of political and economic crises.
The failure to approve the budget also leads to the postponement of investment projects, slows down the implementation of reconstruction projects, confuses the private sector, and weakens investor confidence, because investment needs a stable and clear financial vision.
Does a larger budget mean a stronger economy?
While a budget of $135 billion annually may seem like an indicator of a strong economy, economic analysis suggests that the size of the budget alone is not enough to judge economic performance.
Strong economies are not measured solely by the size of government spending, but by their ability to transform that spending into production, jobs, investments, and growth in non-oil sectors.
If the majority of the budget remains directed towards salaries, operating expenses, and subsidies, without achieving a parallel expansion in industry, agriculture, and modern services, then the developmental impact will be limited no matter how much the spending increases.
Where did the hundreds of billions go?
Since 2003, hundreds of billions of dollars have flowed into Iraq through public budgets. However, the country still faces challenges in electricity, water, roads, housing, unemployment, and health and education services.
This does not mean that all the money was wasted or did not achieve results, but it indicates that the size of the financial resources was not reflected proportionally in the level of development.
Hence, the role of the efficiency of public spending, the quality of planning, financial control, transparency, and combating corruption becomes apparent, as these factors are no less important than the size of the revenues themselves.
Financial reform… the real opportunity
The government’s directions regarding the 2026 budget indicate a drive towards expanding fiscal space, increasing non-oil revenues, and implementing digital governance.
If these policies are coupled with genuine institutional reforms, they could represent the beginning of a transformation in public financial management, by enhancing electronic oversight, reducing waste, improving revenue collection, and increasing spending efficiency.
But the success of this phase will not depend on the size of the new budget, but rather on the government’s ability to direct resources towards productive projects, improve the investment environment, support the private sector, and diversify the economy.
Conclusion
Iraqi budgets since 2003 reveal a clear economic paradox; the country has witnessed one of the fastest increases in government spending in the region, but this increase has not fully translated into sustainable economic development or infrastructure commensurate with the size of the available resources.
Today, Iraq stands before a new opportunity. If the government succeeds in transforming the budget from a tool for spending to a tool for development, links spending to production, enhances transparency, fights corruption, and encourages investment, then future budgets could represent the beginning of a different economic phase.
However, if the budget remains hostage to excessive reliance on oil, and operational spending increases at the expense of investment, the large figures will remain an indicator of the scale of spending, not the scale of development. The real challenge facing Iraq is no longer increasing revenues, but managing these revenues efficiently and transforming them into a more diversified and sustainable economy.
Economic Studies Unit / North America Office,
rawabetcenter.com
