Baghdad (IraqiNews.com) – Iraq’s budget deficit has surpassed 7 trillion Iraqi Dinars in the first half of 2025, according to a report from the Eco Iraq Observatory, a specialized economic monitor. The report warns of a significant financial gap and highlights the limited options available to the government to address the shortfall.
According to Ali Naji, a member of the observatory, the actual fiscal deficit for the first six months of the year reached 7.539 trillion Dinars. He stated that while total revenues were 62.003 trillion Dinars, actual expenditures soared to 69.542 trillion Dinars, which included 3.132 trillion Dinars for the Chinese agreement and 7.485 trillion Dinars for licensing rounds. The report also pointed out that with the current oil price hovering around $68 per barrel, the country would need a breakeven price of $81.6 per barrel to balance its budget, a target that is currently unattainable.
The International Monetary Fund (IMF) echoed these concerns in a report issued last July, forecasting a widening deficit for Iraq over the medium term. The IMF projects the budget deficit to grow from 4.2% of GDP in 2024 to 7.5% in 2025, and to 9.2% in 2026. This is a direct consequence of a projected decrease in oil revenues from 36% of GDP in 2024 to 31% in 2026, coupled with a rise in public spending, particularly on salaries and pensions.
The Eco Iraq Observatory has proposed that the government reduce non-salary operational expenses to mitigate the deficit, warning that reliance on a future rise in oil prices is no longer a viable option. The report’s findings, supported by Bloomberg’s analysis, highlight that while the Iraqi government is actively seeking to diversify the economy away from its 90% reliance on oil, its ability to reduce spending and generate non-oil revenues remains a critical challenge. The government has taken steps to support sectors like agriculture, industry, and tourism, but the data indicates these efforts have not yet been enough to curb the widening deficit.
