BAGHDAD, Sept 10 (Askume) – Prime Minister Mohammed Shia al-Sudani’s top economic adviser said Iraq will face a budget crisis in 2025 because of a collapse in the price of oil, a major source of government revenue.
“We don’t expect major problems in 2024, but we need strict fiscal discipline in 2025,” Mudhar Saleh told Askume in an interview late on Monday.
Iraq is OPEC’s second-largest producer and relies heavily on oil revenues. The hydrocarbon industry accounts for the bulk of export earnings and about 90% of national income.
Heavy dependence on oil makes Iraq particularly vulnerable to fluctuations in global crude oil prices.
Still, Iraq raised its budget in 2024 after record spending in 2023, when an already bloated public sector hired more than 500,000 workers and began repairing capital-intensive nationwide infrastructure.
Saleh said the 2024 budget will rise to 211 trillion dinars ($161 billion) from 199 trillion dinars ($153 billion) in 2023, and the deficit is expected to be 64 trillion dinars.
The budget estimates oil prices at $70 a barrel in 2024, about $6 lower than the likely average price this year.
Saleh said the timely payment of salaries and pensions remains a top priority. They account for 90 trillion dinars ($69 billion), or more than 40%, of the budget and are a key factor in the stability of Iraqi society.
“The government will pay wages at all costs. Wages are sacred in Iraq,” he said.
Meanwhile, if the kingdom finds itself in a financial crisis, infrastructure development could be refocused on the most strategic projects, such as major road and bridge projects in the capital, Baghdad, he said.
To boost finances, Saleh said Iraq was working to increase non-oil revenues through better tax collection but was not exploring any new tax measures.
He estimated that Iraq loses up to $10 billion a year due to tax evasion and customs issues.
Concerns about the 2025 budget reflect challenging global oil markets. Oil prices have been on a downward trend since mid-2022, with international benchmark Brent crude falling from over $120 a barrel to below $75 in recent days.
The decline is mainly due to weak global demand, especially slow economic growth in China, the world’s biggest oil importer. 1 USD = 1,300 dinars
