ShafaqNews/ Iraq’s 2023–2025 budget, approved in June 2023, is the largest in thecountry’s history, allocating around 198.9 trillion dinars ($153 billion)annually. With a focus on infrastructure development, public sector salaries, andfostering economic growth, the budget promises to play a pivotal role inshaping Iraq’s future.
TheKurdistan Region is set to receive 12.67% of the total budget, amounting toover $12 billion annually. With oil prices projected at $70 per barrel, Iraq expectsoil revenues to reach approximately 117 trillion dinars each year.
However,despite the budget's expansive scope, its implementation has faced significantobstacles. What was intended to be a smooth, multi-year framework has, instead,transformed into a series of annual plans, delaying progress and creatinguncertainty.
Still,the government remains committed to ensuring economic stability.
ImplementationHurdles
MudherMohammed Saleh, financial adviser to Prime Minister Mohammed Shia Al-Sudani, reaffirmedthat the 2025 budget is legally grounded under Law No. 13 of 2023, whichmandates a three-year spending plan.
Salehacknowledged delays in allocations but emphasized that 90% of Iraq’s financialoperations remain unaffected, stating, "The financial and economicsituation is stable, with a high degree of certainty." He underscored theclose collaboration between legislative and executive authorities.
Nevertheless,slow disbursements have raised concerns. Moein Al-Kadhimi, a member of theParliament’s finance committee, warned that delays in finalizing bothoperational and investment budgets could harm market liquidity, hinderbusinesses, and stifle economic growth. “The key issue isn’t just a budgetapproval, it’s funding,” Al-Kadhimi remarked.
Althoughthe 2024 budget is in place, funding for regional development and ministriesremains stalled, delaying new projects.
Al-Kadhimiprojected total revenue from oil and non-oil sources at no more than 140trillion dinars ($107 billion). He also called for a cap on allocations at 150trillion dinars—127 trillion for operations and 23 trillion for investments—topreserve fiscal stability.
The CrudeCalculation
Iraq’sheavy reliance on oil revenues continues to strain the country’s finances. The2023 budget projected oil exports at 3.5 million barrels per day at $70 perbarrel.
However,actual exports fell to 3.2 million barrels per day, creating a 3 trillion dinar($2.3 billion) gap. This shortfall has compounded the financial pressure, withoil prices fluctuating between $60 and $80 per barrel.
Ahmedal-Jassim, a financial analyst, pointed out, "Oil prices, the backbone ofIraq’s budget, remain highly volatile. The government faces mounting pressureto manage expenditures carefully."
Lookingahead to 2025, Iraq anticipates a budget deficit of 64 trillion dinars ($48billion), the same as in 2023 and 2024. While total budget allocations haverisen from 198 trillion dinars to 211 trillion dinars, the persistent shortfallraises concerns about the need for increased borrowing, potentially drainingforeign reserves and destabilizing the economy.
FormerPrime Minister Mustafa al-Kadhimi stressed the importance of diversifyingIraq’s revenue sources to mitigate these risks.
With oilprices potentially falling to $60 per barrel, he emphasized the need to boostnon-oil revenues through customs duties, taxes, telecom revenues, utility fees,and state property income.
"Currentnon-oil revenues are below 15 trillion dinars but should reach at least 30trillion," al-Kadhimi asserted.
Despitethese challenges, al-Kadhimi remains optimistic. As long as Iraq maintains anexport rate of 3.5 million barrels per day, liquidity should remain intact,with a funding ceiling of 50 trillion dinars.
However,without significant reforms or a reduction in the deficit, Iraq risks excessiveborrowing and depletion of foreign reserves, endangering long-term financialstability.
Baghdad-KRGRift
Thebudget delays have been primarily driven by a long-standing dispute betweenBaghdad and the Kurdistan Regional Government (KRG).
Abdul-HassanAl-Ziyadi, an economic expert, highlighted the inefficiency of Iraq’s budgetingprocess, which often extends for months, sometimes even a full year. "Thisuncertainty ripples across both public and private sectors, making strategicplanning nearly impossible."
At theheart of the deadlock is a revision to Article 12, Section (C), whichrecalculates the cost of producing and transporting crude oil from theKurdistan Region. Initially set at $10 per barrel, the cost was raised to $16,sparking disputes that have delayed the 2025 budget submission.
Theconflict also reflects deeper political and economic rifts. The KRG insists onmaintaining control over its oil revenues, a right it claims is enshrined inIraq’s Constitution. However, Baghdad argues for central oversight, citing thenational importance of oil revenues.
A keypoint of contention is Article 14 (7), which allows Baghdad to allocate fundsdirectly to KRG provincial governments if the regional administration fails todistribute them fairly.
TheKurdistan Democratic Party (KDP) opposes this provision, with spokespersonShaswar Abdulwahid describing it as “an unconstitutional power grab” thatundermines the Kurdistan Region’s authority over its own resources. Baghdad,however, argues that the measure ensures equitable distribution of resourcesacross Iraq.
Compoundingthe crisis is the KRG’s growing financial strain, exacerbated by the suspensionof its independent oil exports through Turkiye.
SinceMarch 2023, a dispute between Baghdad and Ankara over the legality of Kurdishoil exports has shut down the Ceyhan pipeline, severing the region’s primaryrevenue stream.
Theresulting losses, estimated at $5 billion, have made it increasingly difficultfor the KRG to meet its financial obligations, including salary payments.
Late IsBetter Than Never
Anofficial source revealed to Shafaq News that Iraq is preparing to submit itsfinal 2025 budget to Parliament in the coming days.
Thefinalized budget is expected to be delivered either after the Eid al-Fitrholiday on March 31st or by mid-April for legal review. This schedule alignswith the government’s financial priorities and requirements.
The 2025budget, projected at around $200 billion, faces a significant deficit. This gapis primarily due to a sharp decline in Iraq’s strategic reserves of gold andforeign currency, as well as liquidity shortages.
Furthermore,the government’s ongoing commitment to large-scale projects requiringsubstantial funding has put additional strain on Iraq’s finances.
As aresult, the operational budget will see reductions, and the pace of governmentservice projects will slow.
Sectorsunder Siege
PublicService Strain
Thebudget crisis has had far-reaching consequences, particularly in the publicservices sector. Disruptions in funding have left healthcare, education, andsocial programs in limbo, directly affecting millions of Iraqis who rely ongovernment services.
ManarAl-Abidi, executive director of the Iraq Future Foundation, noted, "Eachdelay not only disrupts contractors and businesses but directly affectscitizens. From hospitals to schools, funding interruptions have stalledessential services, straining the systems people depend on."
Accordingto the Ministry of Planning, up to 30% of essential public services have beenaffected.
Salarydelays for 2.5 million government employees, including teachers and doctors,have fuelled public frustration, while pensioners continue to struggle withdelayed payments.
TheMinistry of Health has warned that 60% of public hospitals are running low onessential medical supplies, forcing patients to seek private care.
Meanwhile,more than 7,000 schools have had operations delayed, impacting 2.8 millionstudents and raising concerns about Iraq’s long-term educational prospects.
Economicresearcher Ahmed Eid described the situation as a “major crisis” that couldupend Iraq’s economic stability.
"Abudget isn’t just a financial document, it’s the backbone of economic growth,job creation, and financial security," Eid emphasized.
He warnedthat continued delays risk stalling progress, scaring off investors, andweakening market confidence.
PrivateSector Struggles
Theprivate sector is also feeling the strain. The Ministry of Planning reportsthat 42% of key development projects planned for 2024, worth more than $12billion, have been put on hold. This is particularly evident in theconstruction sector, where activity has dropped by 20% due to the suspension ofgovernment contracts.
Businessesdependent on public sector spending are also facing mounting challenges."This delay is fuelling economic uncertainty," Eid cautioned."Companies are hesitating to invest, and hiring freezes are spreadingacross industries."
TheFederation of Iraqi Industries has reported that 35% of small and medium-sizedenterprises have experienced declining revenues, while private sectoremployment has shrunk by 8% in the first quarter of 2024.
As the budgetimpasse continues, experts are urging a swift resolution. "The budget isnot just about numbers—it’s about Iraq’s future," Eid concluded.
"It’scrucial that the government prioritize public interests over politicalbargaining to safeguard the country’s economic future."