2026-05-24T07:18:38+00:00
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Shafaq News
Iraq entered
its 16th consecutive month without approving a federal budget while more than
4,500 projects remain suspended across the country, exposing widening strains
on public finances, investment planning, and essential services.
The stalled
projects include hospitals, schools, bridges, tunnels, water networks, and
sewage infrastructure, some frozen since 2014, according to parliamentary
Services Committee member Safaa al-Jabri, who warned that delays are
increasingly affecting critical sectors such as healthcare and education. “The
current situation requires urgent intervention,” al-Jabri told Shafaq News,
calling for a “realistic” 2027 budget focused primarily on unfinished and
service-related projects rather than “traditional expenditure-based budgeting.”
The prolonged
delay has left Iraq operating without a formally approved federal budget since
the expiration of the country’s three-year budget cycle for 2023–2025, pushing
state institutions deeper into temporary financing mechanisms and limiting the government’s
ability to launch new investments.
Under Iraqi
law, the government was required to submit the 2025 budget schedules to
parliament before the end of 2024. Yet from January 2025 through May 2026,
lawmakers neither voted on nor formally ratified the budget tables, leaving
ministries and provinces dependent on restricted spending allocations carried
over from previous fiscal periods.
Read more: Iraq’s budget: political fiscal gaps threaten national stability in 2025
Prime
Minister’s economic adviser Mudhir Mohammed Saleh said Iraq had effectively
exited the three-year budget cycle at the end of December 2025 and was now
operating under the Financial Management Law No. 6 of 2019. That mechanism
allows spending based on the “1/12 rule,” enabling the government to finance
salaries and operational expenses through monthly allocations equivalent to
one-twelfth of previous annual expenditures.
Saleh told
Shafaq News that the arrangement has so far prevented a complete financial
breakdown by allowing the continuation of salaries, basic operational spending,
and funding for projects already close to completion. However, he stressed that
the system blocks the launch of new strategic or investment projects without
parliamentary approval of a new federal budget. “The budget is no longer just a
technical financial instrument; it has become a tool for economic stability and
absorbing external shocks.” He linked the growing fiscal pressure to escalating
geopolitical risks in the Gulf, particularly fears surrounding maritime trade
disruptions and what he described as the “Hormuz shock,” referring to threats
facing oil exports through the Strait of Hormuz.
The political
deadlock surrounding the budget also remains unresolved. Finance Committee
member Rebar Karim told Shafaq News that passing the 2026 federal budget
depends on the formation of the next government and the submission of its
program to parliament.
Karim said the
committee was prepared to review and approve the budget “within a short
timeframe” once the government submits the draft law, adding that parliament
had received assurances there was currently no liquidity crisis and that
public-sector salaries remained secured for the coming months.
Economic and
financial expert Safwan Qusay argued that the crisis extends beyond procedural
delays in passing a budget and instead reflects broader vulnerabilities in
Iraq’s economic model. “The real challenge is declining oil revenues and the
state’s diminishing ability to finance operational spending,” Qusay told Shafaq
News.
He called for
expanding partnerships with the private sector to reduce pressure on the public
payroll system, proposing that some government-run sectors shift toward private
operation models while maintaining state ownership. Qusay also urged Iraq to
diversify its export routes away from excessive reliance on Gulf shipping
corridors, pointing to alternative outlets through Aqaba, Baniyas, and Ceyhan,
alongside expanded land transport options.
Read more: What does Iraq’s new government promise? A guide to Ali Al-Zaidi’s ministerial program
The warnings
come amid escalating Gulf tensions and growing fears over disruptions to oil
flows through the Strait of Hormuz, which carries around 20% of global oil
supplies.
Qusay also
warned that weak non-oil exports and heavy import dependence continue to
pressure Iraq’s foreign currency reserves and exchange-rate stability, calling
for closer coordination between fiscal and monetary policy.
The absence of
a budget has also intensified concerns over employment and recruitment, with
ministries unable to move forward on large-scale hiring or development plans
under temporary spending rules.
The debate
comes as Prime Minister Ali al-Zaidi’s government attempts to frame its
upcoming fiscal agenda around economic reform, diversification of state
revenues, and reduced dependence on oil income. Al-Zaidi has recently pledged
that the next budget will prioritize productive and service-oriented projects while
tightening spending controls, combating corruption, and expanding job
opportunities.
Read more: Liquidity shortage delays Iraqi salaries: Experts warn of prolonged financial strain
Written and edited by Shafaq News staff.
