High spending and shifting priorities push Iraq’s budget into deficit

The latest Finance Ministry budget data from November 2024 highlights a shift in the government’s fiscal priorities, as operational spending surged while capital investment dropped sharply.

The monthly deficit reached 3 trillion IQD, reflecting both increased government expenditures and a slight dip in non-oil revenues. With total operational spending at nearly 13 trillion IQD, November’s spending was well above the 2024 average of 10.3 trillion IQD, continuing a trend of rising recurrent costs.

The Ministry of Electricity accounted for the largest increase in spending, jumping by 3.4 trillion IQD in November alone. Much of this increase went toward fuel imports and intermediate goods, which rose by 2.65 trillion IQD. The spike in spending is likely tied to seasonal energy demands and infrastructure maintenance.

The government continued salary payments to the Kurdistan Region, allocating 1.4 trillion IQD for wages, along with an additional 464 billion IQD for pensions and social security payments. These payments remained consistent, despite ongoing political tensions over revenue sharing. While maintaining stability in public sector salaries is a priority, the financial burden of KRG payments raises concerns about long-term fiscal sustainability, especially given the broader pressures on the federal budget.