Iraq faces “serious” challenges with a fiscal deficit exceeding 7 trillion dinars.
Iraq faces “serious” challenges with a fiscal deficit exceeding 7 trillion dinars.
2025-09-06 02:20
Shafaq News – Baghdad
The Echo Iraq Observatory, which specializes in economic affairs, noted on Saturday that there is a large financial deficit in the Iraqi budget, exceeding 7 trillion dinars during the first half of 2025, with limited options available to cover this deficit.
Ali Naji, a member of the observatory, said in a press statement received by Shafaq News Agency, “Figures based on official state data indicate that the recorded financial deficit reached 7.539 trillion dinars,” explaining that “oil revenues during the first half of 2025 amounted to 56.7 trillion dinars, out of total revenues estimated at 62.003 trillion dinars.”
He added that “actual expenditures amounted to 69.542 trillion dinars, including the costs of the Chinese agreement amounting to 3.132 trillion dinars, in addition to the costs of the licensing rounds amounting to 7.485 trillion dinars.”
The Observatory also noted that the persistence of this deficit poses serious challenges to the government, given the limited economic alternatives available. This calls for urgent and sustainable solutions to ensure the stability of the country’s public finances.
He suggested that “the government reduce operating expenses not related to salaries and wages to reduce the volume of expenditures,” stressing that “relying on rising oil prices is no longer a feasible option at the present time or in the near future.”
According to the observatory, “the current selling price of oil is approximately $68 per barrel, while it needs to reach $81.6 to achieve financial balance for the budget, and this is not currently possible.”
The statement warned that “financial decision-makers are not listening to the proposals put forward by economic experts in various sectors to address expenditures and diversify sources of revenue.”
The International Monetary Fund (IMF) reported in a July report that Iraq faces a worsening fiscal deficit in the medium term due to declining oil revenues, driven by lower prices and increased financing constraints. Meanwhile, the estimated crude oil price needed to balance the budget has risen by more than 55%.
Iraq’s public finances are expected to witness a significant decline, with the general budget deficit estimated at 4.2% of GDP in 2024, expanding to 7.5% in 2025, and then 9.2% in 2026.
This comes amid a decline in oil revenues from 36% of GDP in 2024 to 31% in 2026, while public spending is expected to rise from 43.5% to 43.8% during the same period, particularly in wages and pensions, which will reach 24.5% of GDP in 2026, according to the International Monetary Fund.
The Iraqi government is seeking to diversify the economy and reduce its reliance on oil, which accounts for more than 90% of state revenues. Steps have been taken to strengthen non-oil sectors such as agriculture, industry, and tourism, along with measures to improve the business environment and provide guarantees to the private sector, with the goal of attracting local and foreign investment to develop these sectors, according to a Bloomberg report.
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