Shafaq News
Iraq is
approaching 2026 without the detailed budget tables for 2025, even as the
fiscal deficit widened to 17.7 trillion dinars ($13.5 billion) through
September. Rising expenditures, stagnant revenues, and an unresolved political
impasse have pushed the country into a restrictive spending environment that is
freezing projects nationwide and tightening pressure on ministries and
provinces.
Although
parliament passed a three-year budget framework for 2023–2025, the government
has yet to submit the 2025 tables. Under Financial Management Law No. 6 of
2019, Iraq remains bound by the 1/12 monthly spending rule—an emergency
mechanism that permits only minimal expenditure and blocks new service or
investment commitments. The result is a growing deficit and a paralyzed
development agenda.
Eco Iraq
Observatory said on Saturday that the deficit has risen month after month
without effective measures to curb spending or improve revenue collection.
Government expenditures reached 108.9 trillion dinars through September, while
oil and non-oil revenues totaled 91.2 trillion dinars—leaving a gap equal to
19.4 percent of total revenues.
Multiple
overlapping factors have compounded the deadlock. Government calculations
assumed an oil price of $70 per barrel, but global volatility and regional
tensions kept prices unpredictable. OPEC’s mandated cuts—95,000 barrels per day
in the first quarter of 2025 and 70,000 barrels per day thereafter—further
constrained income.
Read more: Iraq’s budget: political fiscal gaps threaten national stability in 2025
The
political dispute with the Kurdistan Region continues to weigh heavily. Article
12, which regulates production, transport, and delivery of Kurdish oil to the
State Oil Marketing Organization (SOMO), remains unresolved. The 2024 census
added another layer: the Kurdistan Region now accounts for 14.03 percent of
Iraq’s population—higher than the 12.63 percent allocation used in the
budget—requiring technical adjustments that have yet to be negotiated.
Non-oil
revenue collection has also underperformed, reaching less than half of
projected levels for two consecutive years, leaving the fiscal system
overwhelmingly dependent on oil.
Across the
country, provinces are feeling the consequences of stalled financing.
In Basra and
Nineveh, water treatment upgrades, school rehabilitation, electricity works,
and road projects remain suspended. Routine maintenance of power stations,
water networks, and municipal roads has slowed sharply, causing visible
deterioration in essential services. Funding shortages have even threatened
critical medical facilities, including cancer and cardiac centers.
In the
Kurdistan Region, the absence of the 2025 tables has disrupted planning in
Erbil and Al-Sulaymaniyah, particularly salary allocations and investment
scheduling—issues that have already strained local finances.
In the
capital, the crisis is even more pronounced. Baghdad Provincial Council member
Amer Dawood al-Feyli said the absence of approved budgets has broadly halted
projects, noting that the 2025 budget for the Baghdad Provincial Council “has
not been released so far,” delaying service work and payments to contractors.
He said the
problem is most evident in the Projects Directorate of the Baghdad
Municipality, where contractors have stopped work due to the lack of financing.
“This has directly affected service levels in the capital and slowed progress
across key sectors,” he warned.
Former
Parliamentary Finance Committee member Mouin Al-Kazemi explained to Shafaq News
that the repeated budget delays undermine long-term planning, discourage
foreign investment, and increase operational risks. “Payments to international
oil companies have already been postponed, and several field-development plans
have slowed.”
In turn,
Parliamentary Economic Committee member Kazem Al-Shammari cautioned that the
issue goes far beyond parliamentary approval as the budget determines
allocations for vital investment projects and essential services—such as social
welfare and Iraq’s food ration card—which affect millions of citizens.
He stressed
that parliament has repeatedly urged the government to submit the 2025 tables,
but those calls have gone unanswered. “The government is clearly failing in its
constitutional duties,” Al-Shammari said, warning that the delay directly
limits the state’s ability to meet its obligations.
Eco Iraq
Observatory recommended reducing non-salary expenditures—particularly
investment spending, which already exceeded 14 trillion dinars ($10.7
billion)—cutting nonessential purchases and raising taxes on non-food imports.
It also called for higher fees on foreign workers and tourists to increase
non-oil revenue.
Al-Kazemi
said members of the Shiite Coordination Framework are pushing for a realistic
budget that aligns spending with actual revenues. He expects the 2026 budget to
total around 150 trillion dinars ($114.5 billion), significantly lower than the
211 trillion dinars approved for 2025, of which only 150 trillion were actually
spent.
Iraq’s
fiscal system continues to suffer from structural vulnerabilities. Salaries
alone consume more than a quarter of total expenditure in a government
workforce that has quadrupled since 2003. Oil accounts for more than 93 percent
of the state’s income in 2025, leaving the economy exposed to global price
swings and limiting fiscal maneuverability.
With
ministries unable to launch new projects, provinces unable to pay contractors,
and parliament unable to debate a budget that has yet to arrive, Iraq risks
carrying the 1/12 rule well into 2026. That scenario could constrain investment
in an election year, strain Baghdad–Erbil relations further, and weaken the
government’s ability to deliver basic services.
Read more: Recession alert: 2025 budget deadlock threatens Iraq
Written and
edited by Shafaq News staff.
