Billions evaporate monthly… How is Iraq coping with the shock of declining oil exports?
Billions evaporate monthly… How is Iraq coping with the shock of declining oil exports?
6-13-2026
Information / Report…
Recent regional developments and the accompanying turmoil in global energy markets have brought the issue of Iraq’s dependence on oil back to the forefront of economic debate, amid warnings of potential financial repercussions on the general budget and the state’s ability to meet its obligations. Meanwhile, experts assert that current cash reserves still provide a safety net, preventing the crisis from escalating into a full-blown financial collapse.
Iraq relies almost entirely on oil revenues to finance its public expenditures, with oil revenues constituting more than 90 percent of budget resources. This means that any decline in exports or global prices directly impacts the country’s financial and economic situation.
In this context, economist Faleh al-Zubaidi warned of the serious consequences of declining oil exports, emphasizing that financial losses range between $250 and $300 million daily, while monthly losses reach approximately $7 billion, in addition to a monthly budget deficit approaching $5 billion due to the drop in oil revenues.
These figures reveal the magnitude of the challenge facing the Iraqi government. A prolonged decline in oil revenues could place increasing pressure on public spending, particularly given the rising costs of salaries, social welfare, and public services, all of which rely heavily on oil revenues.
Al-Zubaidi also pointed to a drop in oil exports of approximately 3 million barrels per day and a decrease in production from 4.3 million barrels per day to about 1.4 million barrels per day, allocated for domestic consumption and refining. This means Iraq has lost between 85 and 89 percent of its usual oil exports, a development described by observers as one of the most serious challenges facing the Iraqi economy in years.
For his part, MP Basim al-Gharabi warned of the repercussions of regional and international tensions on the national economy, emphasizing that the general budget’s reliance on oil has made Iraq more vulnerable to external shocks and global economic fluctuations. Al-Gharabi believes that the failure of successive governments to diversify national revenue sources has contributed to keeping the Iraqi economy hostage to international variables and energy markets.
These concerns are reinforced by reports indicating a decline in Iraqi oil exports of between 2.5 and 3 million barrels per day compared to normal levels, raising questions about the state’s ability to maintain current spending levels if the crisis persists.
In contrast, financial expert and former Central Bank board member Ahmed Barhi offers a more optimistic view, asserting that Iraq possesses foreign currency reserves that enable it to weather the current crisis without resorting to external borrowing in the near term. He points out that these reserves provide a significant financial buffer that helps the government address the temporary challenges resulting from the decline in oil revenues.
However, economists believe that while these foreign currency reserves are important, they do not represent a permanent solution to the problem. Rather, they serve as a means to absorb temporary shocks, while the fundamental solution remains linked to restructuring the Iraqi economy and diversifying income sources by supporting the industrial, agricultural, and investment sectors and developing non-oil revenues.
The current crisis reaffirms that the Iraqi economy continues to face a structural challenge: its over-reliance on oil. This makes any regional tension or disruption in global energy markets a rapid and direct threat to financial and economic stability. Amid warnings of a widening fiscal deficit and assurances regarding the strength of foreign currency reserves, the future of the Iraqi economy remains contingent on policymakers’ ability to leverage this crisis as an opportunity to transition towards a more diversified economy, less dependent on the volatility of the global oil market.
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