Will Iraq escape bankruptcy? How will the government face the coming storm?
Will Iraq escape bankruptcy? How will the government face the coming storm?
2-11-2025
Information / Special…
Increasing warnings from MPs and economic experts inside and outside Iraq indicate that the country may be exposed to a stifling financial crisis that may reach the point of being unable to pay salaries and government obligations by 2025.
In an economy that is almost entirely dependent on oil, and amidst declining revenues and cash reserves, popular circles are anticipating an unknown fate, similar to an economic flood that may destroy social and political stability.
A looming crisis: What are the causes?
Iraq faces several serious financial challenges that intersect to form a bleak picture of the future of the Iraqi economy:
1_ Decline in oil revenues: Iraq depends on oil to finance more than 90% of its budget, and with global price fluctuations and declining exports, the government’s financial resources are seriously declining.
2_ Oil smuggling by the region under American sponsorship: Reports indicate that large quantities of Iraqi oil are being smuggled through Kurdistan to international markets without the central government benefiting from its revenues, which increases the budget deficit.
3_ Decrease in bank savings levels, as data from the Central Bank confirms a decline in deposits in the Iraqi banking system in recent months, which reflects the weakness of citizens’ confidence in the financial system, and prompts them to keep their money outside banks.
4- Huge government expenditures and unjustified privileges: The salaries of the three presidencies, parliamentarians and advisors continue to drain a large portion of the budget, at a time when the country is suffering from a lack of funding.
5- American pressures in light of Trump’s return: Baghdad may face more economic pressures, which may be reflected on Iraq due to the economic relations between the two countries.
Does the government have solutions?
Despite the concerns, there are still some options available to the government to confront the potential crisis, but this requires bold and rapid reforms:
• Cancel unnecessary privileges and reduce the salaries of senior officials to reduce the burden on the budget.
• Enhance transparency in the oil sector and prevent the smuggling of revenues.
• Diversify the economy and reduce excessive dependence on oil by supporting productive sectors.
• Strengthen citizens’ confidence in the banking sector through financial reforms that reduce capital flight.
• Negotiate with international and regional powers to maintain the stability of economic relations.
Will Iraq survive financial collapse?
Iraq is not the first country to face the threat of bankruptcy, but it has enormous resources that could save it if used properly. But time is running out, and if real measures are not taken in the coming months, the government may find itself facing a crisis that is difficult to contain, and the citizen will be the most affected.
The question that remains is: Will the government dare to confront the “economic whales” within the country, or is Iraq already heading towards the abyss?
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