The latest budget execution figures from the Ministry of Finance show that government revenues rebounded in July for the first time since the start of the US-Iran war. Capital spending remained severely constrained, however, while the government increased its allocation for debt servicing.
The Finance Ministry’s latest figures cover the first seven months of 2026. Total spending reached IQD 68.2 trillion against revenues of IQD 39 trillion, leaving a deficit of IQD 29.2 trillion. By comparison, the deficit stood at just IQD 5.3 trillion by the end of July 2025.
During July this year, the government continued to meet its payroll commitments in full, including salaries and social welfare payments across federal Iraq and the Kurdistan Region. These accounted for around 75% of total government spending.
At the same time, the government sharply increased debt servicing payments, which reached IQD 2.2 trillion in July. By comparison, it spent an average of IQD 660 billion per month on debt servicing during the first half of the year.
Capital expenditure was once again hit hardest by the fiscal squeeze, with the government spending just IQD 325 billion in July. By comparison, the Sudani government spent an average of IQD 1.84 trillion per month on capital expenditure during 2025.
The rebound in government revenues during July helped contain the widening deficit. Revenues reached IQD 3.2 trillion, up 43% from June, marking the first monthly recovery since revenues collapsed in May due to the closure of the Strait of Hormuz. Nevertheless, July revenues remained far below the 2025 monthly average of IQD 10.3 trillion.