Iraq Economic News and Points To Ponder Monday Morning 6-8-26
Government advisor: The 2027 Budget Will Enhance Fiscal Sustainability and Support Economic Reform
Money and Business Economy News – Baghdad The Prime Minister’s financial advisor, Mazhar Muhammad Salih, confirmed on Monday that the 2027 budget will enhance financial sustainability and support economic reform, noting that government spending continues in accordance with the Financial Management Law despite the delay in approving the budget.
Saleh said that “Iraqi financial policy is still being managed in accordance with the provisions of the amended Federal Financial Management Law No. (6) of 2019, particularly Article (13) thereof, which regulates the mechanisms of public spending in the event of a delay in the approval of the Federal General Budget Law,” noting that “the aforementioned article allowed the continuation of the work of state institutions by granting the Minister of Finance the authority to authorize ministries and entities not affiliated with a ministry to spend at a rate of (1/12) monthly of the total actual current expenditures for the previous fiscal year after excluding non-recurring expenditures, until the approval of the Federal General Budget.”
He added that “this mechanism contributed to ensuring the financing of the state’s basic obligations, foremost among them salaries, wages, pensions, social protection and welfare benefits, as well as the operational expenses necessary to continue providing public services,” explaining that “the same article allowed for the continuation of financing ongoing investment projects based on actual completion rates or completed equipment, provided that cash liquidity and expected allocations are available within the subsequent budget project.”
Saleh explained that “Iraqi public finances faced exceptional challenges during 2026 as a result of geopolitical and regional developments and the accompanying disruptions in global energy markets, supply chains and international trade, which directly affected oil revenues, which represent the main source of public revenues,” stressing that “these changes imposed increasing pressure on the government’s financial position and its ability to finance operational and investment spending, which prompted the government and the Ministry of Finance to move towards preparing the draft federal general budget for 2027 according to a reformist perspective aimed at maintaining financial sustainability and macroeconomic stability.”
He pointed out that "the anticipated budget will focus on enhancing the efficiency of public resource management and rationalizing operational spending, protecting social spending related to the most vulnerable groups, as well as giving priority to investment projects with high economic and developmental feasibility," noting that "among the budget's priorities is also diversifying sources of public revenues and reducing relative dependence on oil revenues, supporting financial and administrative reform programs and government digitalization, in addition to enhancing the national economy's ability to cope with external shocks and achieve financial stability in the medium and long term."
Saleh affirmed that "these trends are consistent with the objectives of the state's financial strategy and public financial management development programs, as well as the pillars of Iraq's 2035 vision, which aims to build a diversified and sustainable economy capable of achieving comprehensive growth and development and enhancing the resilience of public finances in the face of regional and international changes." https://www.economy-news.net/content.php?id=69992
The Dollar Is Near A Two-Month High As Expectations Of A US Interest Rate Hike Grow.
Money and Business Economy News - Follow-up The US dollar held near a two-month high on Monday after a strong US jobs report boosted investors' bets on Fed action.
The US Federal Reserve is expected to raise interest rates this year, while the yen has fallen further into territory that warrants intervention.
Currency movements were largely limited compared to the broader market, as a sharp sell-off hit technology stocks in Asia, and the dollar held onto the strong gains it made following a report showing a better-than-expected increase in non-farm payrolls of 172,000 jobs last month.
The euro fell against the dollar to its lowest level in two months, reaching $1.1507, while the British pound hit a three-week low of $1.33165, according to Reuters.
The Australian dollar and the New Zealand dollar similarly fell to their lowest levels in two months at $0.7016 and $0.5779 respectively.
Jonas Gaultermann, senior market analyst at Capital Economics, said: "The US jobs report paints a picture of an improving US labor market despite the current energy price shock."
US Interest Rate
He added: "This situation makes a tightening of monetary policy by the US Federal Reserve later this year increasingly likely, and we now expect the Federal Open Market Committee to raise interest rates twice by 25 basis points later this year, in response to the energy supply shock and the US labor market's return to acceleration."
Israel said it bombed military targets in western and central Iran on Monday, even after reports that U.S. President Donald Trump had asked Israeli Prime Minister Benjamin Netanyahu to refrain from launching further attacks.
According to the CME Group's FedWatch tool, markets now expect a greater than 70% probability that the Federal Reserve will raise interest rates in December, a sharp increase from a 45% probability a week ago.
Japanese Yen
The rise in the dollar in turn led to a further decline in the yen to 160.33 per dollar, erasing the gains it had made following Tokyo's intervention by injecting 11.7 trillion yen ($73.01 billion) just over a month ago, when it fell to its lowest level since July 2024 at 160.725 per dollar.
Sources told Reuters that the Bank of Japan is expected to raise interest rates this month unless there is a sharp escalation in the Middle East conflict that destabilizes markets, as rising fuel prices resulting from the energy crisis exacerbate price pressures on the economy.
As for cryptocurrencies, Bitcoin rose by more than 1% to $62,610, recovering after falling to its lowest level since October 2024 last week, and the price of Ether also increased by more than 1% to $1,652.23, after falling to its lowest level in 14 months last week. https://www.economy-news.net/content.php?id=69988
Fitch Maintains Its Forecast For The Average Price Of Brent Crude At $87 Per Barrel
Energy Economy News - Follow-up Fitch Ratings predicted that the global oil market would experience a significant supply surplus during the fourth quarter of this year, despite the sharp price increases caused by the closure of the Strait of Hormuz.
The agency stated that the current price shock reflects a temporary logistical disruption in supplies, not a permanent loss of production capacity, and predicted that the strait would reopen by the end of next July after an effective closure that lasted 5 months.
Fitch maintained its forecast for the average price of Brent crude at $87 per barrel in 2026, but expects a sharp decline in prices after shipping resumes and supplies return to the markets.
The agency expects global oil supply to fall by an average of 2.9 million barrels per day this year compared to 2025, but the market could quickly turn into a surplus after the Strait is reopened.
The war between Israel and Iran has resumed, representing a dangerous escalation that puts the declared ceasefire in the region to a difficult test and threatens to undermine hopes of reaching an agreement to end the war in the Middle East and resume the flow of crude oil through the Strait of Hormuz.
The war has largely stopped since the United States and Israel halted their attacks on Iran in early April, but Tehran continues to block most shipping traffic through the Strait of Hormuz.
Amid the resulting supply crisis, the OPEC+ group agreed on Sunday to increase its oil production for the fourth time in four months. https://www.economy-news.net/content.php?id=69994
Dollar Prices Rise Against The Dinar In Baghdad
Stock Exchange Economy News – Baghdad The exchange rate of the US dollar against the Iraqi dinar rose on Monday morning in Baghdad markets.
The dollar exchange rate rose in the Al-Kifah and Al-Harithiya exchanges in Baghdad to reach 154,750 dinars per 100 dollars, while yesterday, Sunday, the rate was 154,000 dinars per 100 dollars.
Selling prices in exchange shops in the local markets of Baghdad have increased, with the selling price reaching 155,250 dinars for 100 dollars, while the buying price reached 154,250 dinars for 100 dollars.
https://www.economy-news.net/content.php?id=69993
The Economic Challenges Facing The New Government From The Perspective Of Economic Fragility (An Analytical Study)
Economy News — Baghdad Samir Al-Nassiri Overcoming economic and financial challenges and transitioning to sustainable reform is a priority in the new government's ministerial program.
A roadmap for reform and recovery has been drawn up according to the points in the third axis of the program, which forms the cornerstone for building effective economic stability and sustainable development, in accordance with Iraq's economic vision as outlined in the National Development Plan for the years (2024-2028) and Iraq Vision 2030, and the government's stated plans extending to 2035.
Iraq is currently passing through a critical, important, and sensitive phase due to the political, security, and economic conditions resulting from the ongoing war in Iraq's geographical region, the global energy crisis, and the global economic recession.
Furthermore, the economic reality, according to official data and preliminary results of the general population census, indicates that Iraq's population has reached 46 million. Unemployment and poverty rates remain high overall, and the debt-to-GDP ratio and budget deficit are rising.
This is further confirmed by the World Bank, the International Monetary Fund, and Iraqi experts, as well as the weakening of our credit rating from a stable outlook to a negative one, according to the latest assessment by Moody's. This necessitates significant solutions and efforts to achieve economic stability and national security.
To implement the outlined plans, we believe that building the foundations of a comprehensive national security strategy, with a focus on the economic aspect, must result in achieving security, stability, economic development, and financial sustainability.
This will contribute to the well-being of society and must be effective and feasible in the current circumstances facing Iraq.
The magnitude of the economic challenges, both internal and external, and the continued volatility of global oil prices, require the concerted efforts of all governmental, political, and popular entities, as well as the private sector, to protect Iraq, maintain fiscal discipline, and sustainably build a strong, diversified, and sustainable economy based on realistic data.
The fundamental economic principles of the national security strategy, within the economic axis, should be as follows:
1- Building a sound, diversified national economy.
2- Ensuring the private sector plays a pivotal role in leading the market.
3- Providing food, medicine, and environmental security for citizens.
This requires identifying the economic challenges inherited by the new government from previous administrations and transitioning from fragility to recovery and achieving economic stability, which is the foundation for security and social stability in Iraq.
The Macroeconomy Faces The Following Economic Challenges:
First - A mono-economy, relying on the general budget for 90% of its revenues,
a deficit in non-oil revenue, and weak activation of productive economic sectors such as agriculture and industry.
Second - Deficits in the balance of payments and the trade balance.
Third - Chronic deficits in public budgets, problems in financing these deficits, and reliance on domestic and foreign borrowing to cover them.
Fourth - Weak and unclear fiscal, trade, agricultural, industrial, and energy policies, and a
failure to activate the real economy, diversify national income sources, and achieve financial sustainability.
Fifth - Weak foreign and domestic investment and the emigration of Iraqi capital abroad.
Sixth – Weak coordination between fiscal and monetary policy, and reliance on borrowing from the central bank and local banks to finance the budget deficit, which puts the national economy at risk.
Seventh – Weaknesses in the banking system regarding the products it offers to the public, a lack of public trust, slow digital transformation, non-performing loans, and weak international banking relations due to shortcomings in compliance with international standards.
Therefore, We Propose The Following:
First – Radical and comprehensive economic, financial, and banking reform through restructuring the Iraqi economy in terms of the methodology and philosophy that governs it institutionally and legislatively, and continuing and supporting the reform plan undertaken by the Central Bank in cooperation with supporting international companies.
Second – Establishing the foundations and pillars of a social market economy and involving the genuine private sector in economic decision-making institutionally and legislatively, in accordance with Articles 25 and 26 of the Constitution.
Third – Reviewing the legislative framework of the laws issued in 2004 and still in force that regulate economic management, as well as some other laws issued before 2003.