A Financial Crisis Looms In Iraq... The Deficit Exceeds 36 Trillion Dinars
November 9, 2026 Last updated: November 9, 2026
The Independent/- Data on the implementation of the Iraqi federal budget until the end of September 2026 revealed increasing financial pressures facing the Iraqi economy, after public revenues declined by more than 42% compared to the same period last year, coinciding with the continued rise in government obligations, especially employee salaries and social welfare expenditures, in an indicator that highlights the fragility of public finances in the face of fluctuations in oil revenues.
Data published by the Ministry of Finance showed that total government revenues during the first nine months of this year amounted to about 52.822 trillion dinars, compared to about 91.168 trillion dinars during the corresponding period of 2025, a decrease of about 38.346 trillion dinars, equivalent to 42.1% of the total revenues of last year during the same period.
This decline reflects one of the most prominent challenges facing Iraqi fiscal policy, especially since the state relies on oil revenues to finance a large part of its expenditures, at a time when operational and social obligations continue at high levels that are difficult to reduce in short periods without economic and social repercussions.
Oil revenues amounted to approximately 40.202 trillion dinars, compared to 81.749 trillion dinars during the first nine months of 2025, a decrease of approximately 41.547 trillion dinars, or 50.8%, which means that Iraq lost more than half of its oil revenues recorded in the corresponding period of last year.
In contrast, non-oil revenues rose to about 12.620 trillion dinars, compared to about 9.420 trillion dinars in the same period of 2025, an increase of nearly 34%, but this improvement was not enough to compensate for the sharp decline in oil revenues.
These figures indicate that the improvement in tax collection and non-oil resources, while important, remains limited compared to the extent of dependence on oil exports, as oil revenues constituted about 76% of total revenues, compared to 24% for non-oil resources.
While financial resources declined, government spending remained at high levels, widening the gap between revenues and expenditures and increasing the importance of finding stable sources of funding to cover public obligations.
According to the published data, current expenditures amounted to 85.680 trillion dinars, while total government expenditures, after accounting for investment spending, reached about 89.08 trillion dinars, compared to revenues of 52.822 trillion dinars, bringing the financing gap to about 36.26 trillion dinars during the first nine months of the year.
This means that the resources obtained by the state covered only about 59.3% of its total expenditures, while approximately 40.7% of spending still needed to be covered by other sources of funding, or by available balances according to the actual financial situation.
The composition of government spending reveals an important aspect of the structural problem, as employee compensation topped the spending items with a value of about 46.135 trillion dinars, followed by social welfare expenditures with about 20.572 trillion dinars, meaning that these two items alone accounted for about 66.707 trillion dinars.
This value exceeds the total government revenues recorded up to the end of September by about 13.885 trillion dinars, which is an indication of the widening size of basic financial obligations compared to the available resources, even though public revenues are used to finance all spending items and are not allocated accountingly to these two items alone.
The data also shows that current expenditures accounted for more than 96% of government spending, compared to a limited share for investment expenditures, which raises questions about the budget’s ability to balance financing existing obligations with providing the resources needed to implement infrastructure and economic development projects.
These figures reflect a long-standing challenge of operational spending dominating public resources, at a time when the Iraqi economy needs broader investments in the electricity, transportation, industry, agriculture and housing sectors to raise productivity and provide job opportunities outside government institutions.
Iraq's financial indicators up to the end of September 2026
Total revenues 52.822 trillion dinars
Total spending 89.08 trillion dinars
Funding gap 36.26 trillion dinars
Annual revenue decline 42.1%
Compared to 2025
Source: Budget implementation data and reports from the Accounting Department of the Iraqi Ministry of Finance. Shafaq News..+1
Development of Iraqi revenues during the first nine months
Values in trillions of Iraqi dinars
■ Oil revenues
■ Non-oil revenues
The sharp decline in oil revenues shows that Iraq’s public finances are directly affected by the volume of oil exports, global prices, and the state’s ability to ensure the continued flow of revenues, which makes any disruption in energy markets or export routes an additional source of financial risk.
A decline in revenues of this magnitude also raises concerns about the budget's ability to maintain high spending levels, especially if revenues remain at similar levels during the remaining months of the year.
From an economic standpoint, a widening gap between revenues and expenditures may push the government to rely more on borrowing, using available liquidity and balances, or rearranging spending priorities, depending on the legal and financial options available.
Here, the importance of distinguishing between the deficit recorded in the budget implementation data up to the end of September and the final deficit for the fiscal year becomes clear, as the current figures represent the outcome of implementation during nine months, and do not alone determine the final result for 2026 or the amount of borrowing that the government will need.
If the pressure on revenues continues, the government may face more complex financial choices, namely balancing the maintenance of social and service spending, securing the necessary funding for investment projects, and reducing the rise in debt and the burden of servicing it.
Furthermore, a decline in investment spending compared to current spending may have negative effects on economic activity, especially in sectors related to government projects, such as contracting, construction, transportation, equipment and engineering services, if the lack of funding is reflected in the pace of project implementation and the disbursement of company dues.
Conversely, continued expansion of operating expenses without a similar growth in sustainable resources may limit the government’s ability to direct investments towards the productive sectors that Iraq needs to reduce its dependence on oil.
These developments highlight the need for financial and economic reforms that go beyond short-term measures, primarily the development of the tax and customs system, improving the efficiency of revenue collection, reducing financial waste, and expanding the contribution of the private sector to production and employment.
Boosting non-oil revenues would provide greater flexibility for the general budget, but this requires reforms in financial management, improving the business environment, and stimulating local production, instead of relying on increasing fees and taxes in a way that may add new burdens on citizens and the commercial sector.
It is also important to develop mechanisms for monitoring public spending and evaluating the feasibility of government projects and programs, to ensure that limited resources are directed to areas of economic and social priority, and to achieve tangible results in return for the money spent by the state.
In a related context, the International Monetary Fund had warned of increasing pressure on Iraqi finances as a result of rising spending and dependence on oil, noting in its assessment for 2025 that the price of oil needed to achieve fiscal balance rose to about $84 per barrel in 2024, compared to about $54 in 2020, reflecting the increased sensitivity of the budget to fluctuations in crude oil prices.
These indicators gain additional importance as the 2027 budget is being prepared, as the government will face the challenge of building more realistic estimates of oil and non-oil revenues, and setting spending ceilings that are commensurate with the state’s actual financing capacity, in order to prevent the exacerbation of financial imbalances in the coming years.
Figures for the first nine months of 2026 reveal that the financial problem is not only related to the decline in oil revenues, but extends to the nature and structure of government spending, and the extent to which the economy can generate stable resources outside the energy sector.
Given these circumstances, continued reliance on oil to finance high operating obligations will keep public finances vulnerable to external shocks, unless spending policies are coupled with economic reforms that promote sustainable revenues and improve the efficiency of public resource management.
The significant decline in Iraq’s revenues during 2026 puts the government to a real economic test, which is its ability to contain the funding gap and maintain financial stability without imposing additional burdens on citizens and the private sector that deepen the economic slowdown.
While the data reveals a relative improvement in non-oil revenues, the extent of this improvement is still far from compensating for oil losses, making economic diversification, spending control, and enhanced financial transparency essential requirements to protect the Iraqi budget from more complex future crises. https://mustaqila.com/أزمة-مالية-تلوح-في-العراق-العجز-يتجاوز/
Barzani arrives in Baghdad... Oil, salaries, and the 2027 budget are on the table.
November 9, 2026Last updated: November 9, 2026
The Independent/- Kurdistan Regional Government Prime Minister Masrour Barzani arrived in Baghdad on Monday, leading a high-level government delegation, to hold talks with federal officials and political leaders.
The discussions will focus on the region's share in the 2027 general budget and mechanisms for settling outstanding financial and oil issues between Baghdad and Erbil, in an effort to reach understandings that ensure the regularity of financial entitlements and avoid renewed disputes during the coming year.
The visit comes at an important political and economic time, coinciding with government preparations to discuss the new federal budget project, amid continued disagreement over the two sides’ commitments regarding oil revenues, public spending, and the salaries of employees and retirees in the region.
Kurdistan Regional Government spokesman Peshwa Hawrami said that Barzani will hold a series of meetings with Federal Prime Minister Ali al-Zaidi, along with leaders of political parties, forces and figures, to discuss the general budget, joint issues and ways to resolve disputes in accordance with the constitution and political understandings.
Barzani’s arrival in Baghdad was preceded by technical moves, as the regional government announced the arrival of a high-level negotiating delegation on Sunday, November 8, to continue discussions on the region’s financial entitlements within the 2027 draft budget, and to present observations related to its clauses to the relevant authorities in the federal government.
The regional government confirmed that the delegation seeks to establish what Erbil considers constitutional and financial rights, and to guarantee the entitlements of employees, retirees and other categories covered by government spending, in an attempt to reach a clear formula that regulates mutual financial obligations.
The Kurdistan Region’s share of the new budget tops the list of the most sensitive issues, given its connection to operational and investment spending, funding of salaries and service projects, as well as its direct impact on the financial relationship between the federal government and the regional government.
According to information published by Al-Thamina channel, the talks include discussing commitments related to oil delivery, amid trading of a target quantity of 450,000 barrels per day, in addition to mechanisms for calculating the region’s actual expenses and determining the responsibilities of both sides regarding oil revenues.
These details remain within the negotiating files on which no final agreement has been announced, while the two parties seek to reach understandings that can be included in the financial and legal texts of next year’s budget.
The issue of salaries constitutes one of the most prominent challenges facing financial relations between Baghdad and Erbil, after years of disputes over funding, data exchange, and mechanisms for disbursing entitlements, which has made the regularity of salaries frequently linked to understandings between financial institutions on both sides.
From an economic standpoint, reaching a clear agreement on the 2027 budget could provide greater financial stability, reduce the likelihood of delays in funding public expenditures, and improve the ability of government institutions in the region to plan their annual projects and commitments.
Conversely, continued disputes over oil revenues and expenditure determination may affect the approval of some budget items, especially if the mechanisms for delivery, auditing, and financial transfers are not resolved in a way that ensures clarity of responsibilities and obligations.
Barzani’s visit is not only important in financial terms, as it has political dimensions related to reorganizing the relationship between the federal government and the regional government, in light of the need to strengthen coordination between federal and regional institutions and overcome the differences that stem from differing constitutional and legal interpretations.
The participation of political forces in the talks also reflects the importance of political consensus in the success of the financial process, as passing the budget bill within the House of Representatives requires obtaining sufficient parliamentary support, as well as reaching applicable legal formulas.
Media reports had indicated that there were disagreements regarding some items in the draft 2027 budget, with estimates circulating regarding the region's share of total federal spending, but the final figures remain linked to the text that the government will adopt and the House of Representatives will vote on.
Available information indicates that the Federal Cabinet is preparing to discuss the draft budget law on Tuesday, November 10, which gives the ongoing discussions additional importance, as it is an opportunity to bring viewpoints closer before completing the governmental and legislative process for the project.
Economic observers believe that sustainable solutions to the financial disputes between Baghdad and Erbil require long-term institutional mechanisms based on transparency in calculating revenues and expenditures, exchanging financial data, and defining the responsibilities of each party, instead of relying on temporary settlements that renew the disputes when preparing each budget.
Linking financial entitlements to clear procedures and specific dates would reduce the uncertainty faced by employees, retirees and investors, and enhance confidence in the ability of government institutions to manage public resources in a stable manner.
The issue of oil is of particular importance given Iraq’s reliance on oil revenues to finance the bulk of government spending, making the regulation of production, export, and revenue distribution a significant factor in financial stability at the federal level.
In this context, the success of the Baghdad-Erbil negotiations will depend on the willingness of both parties to reach practical understandings regarding revenues, obligations and expenditures, while taking into account the constitutional and legal frameworks that govern the relationship between the federal government and the region.
Despite the importance of the visit and the accompanying political moves, current indicators do not allow for certainty that a comprehensive agreement is imminent, especially given the continued technical and financial issues that require detailed settlements and official approvals.
Barzani’s visit to Baghdad puts both sides to a new test regarding their ability to end recurring disputes and transform political understandings into clear financial commitments, in a way that protects citizens’ rights and ensures the stability of public spending.
The most prominent question remains whether the talks will succeed in opening a new chapter in financial relations between Baghdad and Erbil, or whether the disputes over oil and the budget will continue to cast a shadow over the 2027 budget project, at a time when Iraq needs financial and administrative stability to support economic activity and enhance confidence in government institutions. https://mustaqila.com/بارزاني-يصل-بغداد-النفط-والرواتب-وموا/