Iraq’s largest-ever budget faces roadblocks, threatening economic stability and project execution
Shafaq News/ Iraq’s landmark three-year budget,approved in June 2023, was set to provide a forward-looking financial frameworkfor 2023-2025, but delays in finalizing key provisions and adjusting budgettables are threatening the country’s economic planning and projectimplementation.
Iraq's Historic Budget
In June 2023, Iraq's Parliament approved athree-year general budget for 2023, 2024, and 2025, marking the largest budgetin the nation's history at approximately $153 billion annually. The KurdistanRegion is allocated 12.6% of the total.
Despite its ambitious three-year scope, thebudget has faced delays that are hindering its execution, leading to asituation where the intended multi-year plan has become, in practice, a seriesof annual budgets.
Budget Delays Impact Projects
In June 2023, Iraq's Parliament approved a 2023budget of 198.9 trillion dinars ($153 billion). In June 2024, the Iraqi Councilof Representatives (CoR) approved the country’s 2024 budget of 211.9 trillion dinars(approximately $162.9 billion).
"While countries aim to have their publicbudgets ready by January 1st, launching at the start of the year and concludingat year-end, the situation in Iraq is different, as budgets are often delayedfor long periods," said economic expert Abdul-Hassan Al-Ziyadi.
Al-Ziyadi told Shafaq News that "the publicbudget tables (revenues, spending, and deficit data) in Iraq are usuallydelayed by months, sometimes even a full year, despite their crucial reliance,causing significant issues for the budget itself, the public, and all who relyon it."
The delay in the release of budget tablesaffects all projects. According to Manar Al-Abidi, executive director of theIraq Future Foundation for Studies and Economic Consultations, "Delaysdisrupt the budget, particularly since this year marks the final year of thethree-year budget."
Al-Abidi explained to Shafaq News that a delayin the 2025 budget would halt the entire process, especially since the 2023 and2024 budgets are incomplete. This will lead to further disruptions in thebudget and its core objectives."
“These delays, which may push key projects into2026, are compounded by the need for adjustments in the budget’s allocation toensure that objectives are met in the coming years,” explaining that 2025 is anelection year to form a new government to set the budget. “Based on pastexperience, this process can take anywhere from six months to a full year,resulting in another issue in 2026 when the new budget may not be approved dueto a new government."
Regarding the fate of the 2025 projects,Al-Abidi noted, "If the projects are not approved in the 2025 budget, theycannot be carried over into the 2026 budget, as it is a three-year budget. TheFinancial Management Law stipulates that if the budget is not approved or thereis no budget in a fiscal year, only 1/12 of operational expenditures can bespent, halting investment projects."
Budget Adjustments Needed
The evaluation of government performance relieson data from the Planning and Finance ministries, and the process of revisingallocations for provinces and federal ministries to align with objectivesrequires analytical tables.
According to financial and economic expert Dr.Safwan Qusay, the budget law does not show significant differences between the2023, 2024, and 2025 budgets, indicating the need for reworking certain budgetitems to enable accountability for ministry performance.
In an interview with Shafaq News, Qusay pointedout that "Prime Minister Al-Mohammed Shia Al-Sudani's government isfocusing on covering the service and infrastructure sectors first. There havebeen efforts to implement these projects, some of which were completed ahead ofschedule. This means additional projects could be included to complete 2024 andbegin spending on them in 2025."
He further noted that "The issue of oilproduction in the Kurdistan Region, along with extraction and transportationcosts, needs to be adjusted to around $16 per barrel. Some budget items canalso be modified to match the scale of the goals for the coming year. Ifcertain projects are not funded within the budget, they may be shifted toinvestment."
Qusi concluded by stating, "The FinancialCommittee seeks to review the supplementary tables and update certain items,which will be discussed with the Ministry of Finance before being approved.This process is intended to result in a stable budget for the 2025 legislativesession, as financial stability impacts both fiscal and developmentalstability."
Budget Adjustments Await Approval
Member of the Iraqi Parliament's FinanceCommittee, Moeen Al-Kazemi, clarified that "the government was supposed tosubmit the budget tables, especially since this budget lacks specificprovisions except for Article 12, Section (C), which includes a recalculationof the cost of producing and transporting crude oil from the Kurdistan Region,now estimated at $16 per barrel."
Al-Kazemi told Shafaq News that "thesenumbers differ from the 2023 budget, which used southern oil production as abenchmark. However, as noted, the cost of producing oil in Kurdistan is higherthan in the south. This adjustment is the first step, and next week, the issuewill be presented to the Finance Committee in the Iraqi Parliament for review,first and second readings, followed by a vote on the amendment."
This amendment, according to Al-Kazemi, will impactthe budget tables, particularly operational costs, as the cost of crude oilproduction is included in the operational budget. “This will lead toadjustments for the 400,000 barrels per day exported from Kurdistan. This isthe reason for the delay in submitting the 2025 budget tables."
He explained that the delay in sending thebudget tables is due to the need to amend Article 12, which will allow thegovernment to finalize the tables. “The amendment will affect operationalnumbers; otherwise, the Ministry of Finance could calculate the requiredoperational expenses for 2025, while the Ministry of Planning estimates thecosts for ongoing and new projects in provinces and ministries."
"The Finance Committee believes that thebudget for 2025 should be based on revenues not exceeding 150 trillion dinars,with 120 trillion allocated for operational costs, including oil production,and 30 trillion for investment in provincial and ministry projects."
Al-Kazemi noted that If the tables are notsubmitted, the expenditures from 2024 could be carried forward, as the budgetis a three-year budget. However, the amendment to Article 12, Section (C),requires the government to make this adjustment and for the Parliament toapprove it before the budget tables can be submitted."
