Iraq: 16 months without a budget and warnings of crises

Iraq: 16 months without a budget and warnings of crises

2026-05-23

Shafaq News – Baghdad
Sixteen months have passed without a federal budget being passed in Iraq, amid official warnings and expert concerns about the future of public spending, especially as thousands of projects are stalled and employment mechanisms have been disrupted, in a scene that reflects a financial crisis that goes beyond the accounting dimension to the structure of the economy itself.

The government was legally supposed to send the 2025 budget schedules to the House of Representatives before the end of 2024 (i.e., in October 2024), but from the beginning of 2025 until the current month of May 2026, the schedules have not been voted on or officially approved, which has made the country enter its second year relying on previous frozen budgets and allocations.

According to Mazhar Muhammad Salih, the economic advisor to the Iraqi Prime Minister, “The three-year budget (2023–2025) effectively ended at the end of December 2025,” and public finances in Iraq entered a new phase based on the Financial Management Law No. 6 of 2019, which allows spending according to the (1/12) rule of current expenditures.

Saleh explains to Shafaq News Agency that this mechanism allows “the continued funding of salaries and operating expenses, in addition to covering ongoing projects or those nearing completion,” but on the other hand, “it does not allow the launch of new investment projects unless a new federal budget law is enacted.”

He adds that this financial framework, although a temporary lifeline, places the Iraqi economy under severe constraints at a time when geopolitical challenges in the region are increasing, especially what he described as the “Hormuz shock,” referring to the risks associated with oil export routes in the Gulf.

Saleh warns that the function of the budget is no longer purely technical, but has turned into a “tool for stabilizing the economy and absorbing external shocks,” which makes its absence or delay a factor that multiplies financial and monetary risks.

Projects stalled

Meanwhile, Safaa al-Jabri, a member of the Services Committee in the Iraqi Parliament, reveals the extent of the stalled projects crisis, confirming that their number “exceeds 4,500 projects throughout Iraq,” including hospitals, schools, bridges, tunnels, and water and sewage projects, some of which have been halted since 2014.

Al-Jabri told Shafaq News Agency that the continuation of this situation “calls for urgent measures, especially in the health and education sectors,” stressing the need to move to “a realistic budget for 2027 that is a project-based budget, not a traditional budget of chapters.”

He adds that the current stage requires rearranging government priorities towards basic services (food, health, education) until the economic crisis resulting from regional tensions is overcome, including concerns about the potential effects of any disruption in maritime routes such as the Strait of Hormuz.

Oil and liquidity crisis

For his part, financial and economic expert Safwan Qusay believes that the main challenge is not only the absence of a budget, but also the decline in oil revenues and the erosion of the state’s ability to finance operating expenses.

Qusay, speaking to Shafaq News Agency, points to the need to “expand the partnership with the private sector” to alleviate the burden on the state, by converting part of the government units to private operation within contracts that preserve public ownership, while gradually reducing the cost of government labor.

It also calls for rethinking the oil export system through multiple outlets, including alternative ports such as Aqaba, Banias and Ceyhan, in addition to supporting land and oil transport via tankers, and reducing reliance on a single export route.

On the monetary policy side, Qusay proposes a vision based on “a real twinning between fiscal and monetary policy,” by controlling imports and linking them to the economy’s actual ability to provide foreign currency, with the aim of easing pressure on the dollar and the monetary reserve.

He warns that continued uncontrolled imports, coupled with weak non-oil exports, put the central bank under increasing pressure to manage the exchange market and increase the likelihood of price volatility.

Iraqi Prime Minister Ali Faleh al-Zaidi had confirmed during his recent meetings that his government is proceeding with the preparation of a new budget that reflects the priorities of “economic and financial reform,” with a focus on diversifying sources of income and reducing dependence on oil, controlling spending and directing it towards service and production projects, in addition to a commitment to fighting corruption and expanding job opportunities.

shafaq.com