Al-Zaidi’s advisor to Shafaq News: The government is working on a comprehensive package of economic reforms.

Al-Zaidi’s advisor to Shafaq News: The government is working on a comprehensive package of economic reforms.

2026-08-21

Shafaq News – Baghdad
On Friday, Mazhar Muhammad Salih, the Prime Minister’s economic advisor, affirmed that Iraq is working to reduce the fragility of its economy related to fluctuations in oil prices through a package of measures aimed at increasing non-oil revenues, reforming the financial and banking sectors, supporting the private sector, investing in gas and energy, and rearranging public spending priorities.

Saleh told Shafaq News Agency that the continued heavy reliance of the Iraqi economy on oil makes public revenues and the budget directly vulnerable to fluctuations in oil prices and production, especially with the rise in current spending and the cost of salaries, pensions, subsidies and services, stressing that diversifying sources of income has become one of the most urgent issues to ensure financial and economic stability.

He explained that the government is working to boost non-oil revenues by developing tax and customs administration, combating tax evasion, improving collection systems, and expanding the use of electronic payment, noting that these revenues are still limited compared to oil revenues, which makes the transition from a rentier economy to a diversified economy a gradual process that requires continuous reforms.

Saleh pointed to the importance of reforming the banking sector as a cornerstone of the economic diversification process, through restructuring government banks, strengthening oversight, expanding electronic transactions, and providing a banking environment capable of financing productive projects, especially small and medium-sized enterprises.

He explained that the private sector represents the main driver of any real diversification process, given the potential that Iraq possesses in the agriculture, industry, transportation, services, tourism, communications and energy sectors, noting that developing these sectors requires addressing the challenges of infrastructure, financing, bureaucracy and unequal competition with the public sector.

In the energy sector, Saleh stressed that investing in associated gas and local natural gas represents an important economic opportunity, not only by providing an additional resource for the state, but also by reducing the need to import gas to operate power generation plants, thus reducing the drain on hard currency and pressure on the budget, with the possibility of directing the gas to petrochemical industries, fertilizer production and other value-added sectors.

He stressed that fiscal reform is not only linked to increasing revenues, but also requires rearranging public spending priorities, protecting productive investment spending, and limiting the unchecked expansion of current expenditures, especially since the continued growth of current spending makes public finances more sensitive to any decrease in oil revenues.

He pointed out that government employment represents one of the most prominent challenges facing public finances, after government spending became a major channel for converting oil revenues into direct income for families, indicating that the continued expansion in this direction limits the state’s ability to direct its resources towards investment and services, and reinforces the economy’s dependence on government spending.

He stressed that the challenge lies not only in having economic plans and strategies, but also in being able to implement them continuously and transform them into measurable institutional reforms, leading to a gradual change in the structure of the economy and sources of income.

According to Saleh, Iraq needs an economic model that makes oil an important resource for financing development, and not the almost sole source of state funding, indicating that the Iraq Energy and Development Fund represents a long-term strategy aimed at transforming oil assets into productive capital assets.

He added that the financial plans are based on three parallel tracks: increasing non-oil revenues, reducing reliance on current spending, and expanding the private production base, stressing that the success of these tracks would enhance Iraq’s ability to cope with the decline in oil prices and external shocks.

He added that diverting a portion of oil wealth from short-term consumer spending to productive investments could contribute to building economic sectors capable of providing revenues and job opportunities for decades to come, while the continuation of the current model means that public finances will remain vulnerable to downward cycles in oil prices and their ability to finance expenditures and obligations.

Saleh concluded by stressing that diversifying the Iraqi economy is an urgent necessity linked to the financial, social and sovereign stability of the state, rather than being merely an economic option. He emphasized that the real challenge facing the government lies in transforming plans and reforms into tangible results that make the economy less dependent on oil and more capable of relying on its diverse productive resources.

shafaq.com