Iraq faces a budget crunch in 2025 due to the slump in the price of oil, the overwhelming source of government revenue, a top economic adviser to Prime Minister Mohammed Shia al-Sudani said.
An aerial view shows Majnoon oil field near Basra, Reuters/Essam Al-Sudani
Iraq faces a budget crunch in 2025 due to the slump in the price of oil, the overwhelming source of government revenue, a top economic adviser to Prime Minister Mohammed Shia al-Sudani said.
"We don't anticipate major problems in 2024, but we need stricter financial discipline for 2025," Mudher Saleh told Reuters in an interview late on Monday.
Iraq, OPEC's second-largest producer, is heavily dependent on oil revenues. The hydrocarbons sector accounts for the vast majority of export earnings and some 90% of state revenue.
This huge reliance on oil makes Iraq particularly vulnerable to fluctuations in global crude prices.
Still, Iraq increased its budget in 2024 even after record spending in 2023, when more than half a million additional employees were hired into the already-bloated public sector and a capital-intensive nationwide infrastructure revamp began.
The 2024 budget rose to 211 trillion dinars ($161 billion) from 199 trillion dinars ($153 billion) in 2023, maintaining a projected deficit of 64 trillion dinars, Saleh said.
The budget assumes an oil price of $70 per barrel in 2024, around $6 less than the likely average price this year.
Saleh said that paying salaries and pensions on time remain a top priority. They account for 90 trillion dinars ($69 billion), or over 40% of the budget, and are a key factor of social stability in Iraq.
"The government will pay salaries even if it costs everything. Salaries are holy in Iraq," he said.
Infrastructure development, meanwhile, could be refocused on the most strategic projects - such as key road and bridge works in the capital Baghdad - if the state finds itself in a financial crunch, he said.
To bolster finances, Iraq is focusing on increasing non-oil revenues through improved tax collection but is not exploring any new levies, Saleh said.
He estimated that Iraq loses up to $10 billion annually due to tax evasion and customs-related problems.
Concerns for the 2025 budget reflect a challenging global oil market. Oil prices have been on a downward trend since mid-2022, with Brent crude, the international benchmark, falling from over $120 per barrel to below $75 in recent days.
This decline is largely attributed to weakening global demand, particularly from China, the world's largest oil importer, as its economic growth slows down.
$1 = 1,300 dinars
By Timour Azhari
He celebrated his 50th birthday with a cake decorated with a noose. He says he plans to surround jailed Palestinians with crocodiles. In videos, he berates foreign activists captured at sea trying to bring aid to Gaza, forced to kneel at his feet with their faces pressed to the ground.
Lebanon's social affairs minister said Monday that about 700,000 Syrians have returned home from Lebanon, calling it proof of "the success of coordination between the two countries."
Arab League Secretary-General Nabil Fahmy used a visit to Lebanon's presidential palace on Monday to promise Beirut more diplomatic backing, as fears grow that the war between Hezbollah and Israel could flare up again.
To make this website run properly and to improve your experience, we use cookies. For more detailed information, please check our Cookie Policy.
Necessary cookies enable core functionality. The website cannot function properly without these cookies, and can only be disabled by changing your browser preferences.