Iraqi salaries are “temporarily safe”… Will the Hormuz crisis swallow up the Central Bank’s reserves?
Iraqi salaries are “temporarily safe”… Will the Hormuz crisis swallow up the Central Bank’s reserves?
2026-03-15 04:05
Shafaq News – Baghdad
Concerns are mounting in Iraq about the economic repercussions of the ongoing regional conflict, particularly in light of the threat to close the vital Strait of Hormuz, which is the main outlet for Iraqi oil exports.
Iraq’s economy is heavily dependent on oil revenues, which represent about 90 to 95 percent of the general budget revenues. This crisis presents the Iraqi government with a financial challenge regarding its ability to continue funding operational expenses, primarily the salaries of employees and retirees, should the disruption of oil exports continue for an extended period.
Revenue decline
In this context, economist Ahmed Abdel Rabbo says that concerns about the delay in salary payments are related to the nature of the Iraqi economy, which is largely dependent on oil revenues.
Abdel Rabbo adds to Shafaq News Agency that any disruption in oil exports or decline in prices directly affects the liquidity available to the government, which may create pressure on its ability to cover operating expenses, especially with the high volume of government spending and the increasing number of employees.
In contrast, official data indicates that Iraq has cash reserves exceeding $100 billion with the US Federal Reserve, in addition to about 170 tons of gold.
Economic expert Safwan Qusay says that the closure of the Strait of Hormuz has led to a decline in oil revenues of between $200 and $300 million per day, but the central bank’s reserves are still higher than the level required to cover the value of the Iraqi dinar by approximately 27 percent.
Qusay adds to Shafaq News Agency that these reserves may allow the Central Bank to finance public expenditures ranging between $20 and $30 billion during the next six months, thus providing the government with a time margin to address the crisis.
Lack of confidence
Meanwhile, central bank data shows a decline in the volume of bank deposits during 2025 by approximately 10.95 percent, equivalent to about 12 trillion dinars.
Observers believe that this decline reflects the state of anxiety among citizens in light of the security and economic conditions, as some of them prefer to keep liquidity outside the banking system in anticipation of any possible disturbances.
Rashid al-Saadi, spokesman for the Baghdad Chamber of Commerce, says that the Iraqi economy has suffered for years from structural imbalances, most notably the heavy reliance on oil and weak investment in other sectors.
Al-Saadi adds to Shafaq News Agency that the current financial reserves may allow the government to cover salaries for a period ranging between six months and a year, according to official estimates, but the continuation of the crisis may raise questions about the state’s ability to maintain the same level of spending.
Limited Export
With the southern ports disrupted, the Kirkuk-Ceyhan pipeline through Turkey stands out as one of the available alternatives for exporting oil, but its export capacity is limited compared to the volume of exports that exceeded four million barrels per day before the crisis.
Experts point out that exporting via trucks or land ports can only compensate for a limited percentage of lost exports.
In this context, Safwan Qusay suggests looking for additional export alternatives through regional ports such as Aqaba or Banias, in addition to working on increasing non-oil revenues during the next phase.
High obligations
The Iraqi government needs about 9 trillion dinars per month, or about $6.8 billion, to cover operating expenses, primarily salaries, pensions and social welfare.
Experts believe that a prolonged halt in exports could force authorities to use part of their foreign reserves to secure these obligations, which could have repercussions on monetary stability if the crisis is prolonged.
Official statements indicate that employee salaries for March and April are secured, but the continuation of the oil crisis may make the following months more financially sensitive.
According to economic experts, Iraq’s ability to overcome this stage depends mainly on the duration of the disruption to oil exports, as well as the government’s success in finding alternatives for export or boosting non-oil revenues.
Closing the strait
The war that broke out on February 28, 2026, between the United States and Israel on one side, and Iran on the other, caused an almost complete paralysis of traffic in the Strait of Hormuz, the passage through which about 4.5% of total annual global trade passes, leading to a decline in navigation to very low levels.
This came after Ibrahim Jabari, an advisor to the commander-in-chief of the Iranian Revolutionary Guard, announced on March 2 that the Strait of Hormuz was closed and that any ships attempting to cross it would be attacked.
As a result of the disruption to shipping through the Strait of Hormuz, Iraqi oil production has fallen sharply from 4.3 million barrels per day to 1.3 million barrels per day.
This decline has led to Iraqi exports falling to less than 800,000 barrels per day, and a loss of $128 million per day after oil production stopped, according to the “Eco Iraq” observatory.
Around 20 million barrels of oil pass through this strategic strait daily, and its closure has caused an increase in shipping and insurance costs and a rise in oil prices, raising fears of global economic repercussions.
shafaq.com
