The uncertainty surrounding the external situation is impacting Iraq’s budget and pushing the government towards resorting to borrowing.
The uncertainty surrounding the external situation is impacting Iraq’s budget and pushing the government towards resorting to borrowing.
5-31-2026
Information/Baghdad…
A state of confusion prevails in the Iraqi domestic scene, particularly in the financial sector, for a country that relies primarily on oil revenues as its main source of budget funding. External tensions instigated by the US and Israel have cast a shadow over the situation in Iraq, following the closure of the Strait of Hormuz and the decline in oil exports. This has forced the Iraqi government to resort to difficult options for financing the budget, most notably domestic borrowing, and it may also consider borrowing from the World Bank or raising the exchange rate in local markets.
Former MP Rasoul Radhi told Al-Maalouma, “There is a clear decrease in revenues entering the state treasury after the recent tensions in the region, which is pushing the government to resort to some options to ensure the payment of salaries.”
He added, “The Iraqi budget consists of governing, sovereign, investment, and operational expenditures, which constitute the largest portion of the budget. Therefore, the government faces several options, the most prominent of which are borrowing from the Rafidain and Rasheed banks or the Central Bank.”
He explained that “Iraq’s internal debt has reached 64 trillion dinars from domestic banks and financial institutions due to low revenues entering the state treasury, which has forced the government to resort to domestic borrowing to compensate for the deficit.”
For his part, political analyst Raji Nassir told Al-Maalomah that “the delay in approving the budget does not only affect administrative aspects but also directly impacts investment projects and development spending across various sectors.” He clarified that “continuing to spend according to the Financial Management Law provides a temporary solution for operational expenditures, but it does not compensate for the need for a comprehensive budget that defines the state’s economic priorities.”
He added that “Iraq faces accumulated financial challenges related to high operational expenses and continued reliance on oil as the primary source of revenue, which makes it more vulnerable to any shocks or declines in crude oil prices.” He pointed out that “the budget delay weakens the government’s ability to launch new projects or implement economic programs that contribute to stimulating the local market.”
He pointed out that “the current stage requires expediting the resolution of the budget issue and establishing a clear financial vision that ensures addressing the potential deficit and diversifying income sources away from oil revenues,” warning that “continued delays could negatively impact economic growth, investment levels, and services in the coming period.”
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