Latest budget data confirms growing deficit
Latest budget execution figures released by the Ministry of Finance offer a revealing snapshot of Iraq’s fiscal trajectory through November 2025. A comparison with the same period in 2024 highlights a growing deficit and more domestic borrowing in response.
Total oil revenues during the first eleven months of 2025 reached 100 trillion IQD, representing a 16% decline compared to the 119 trillion IQD recorded during the same period in 2024. The drop largely reflects weaker global oil prices. Brent crude averaged just over $80 per barrel in 2024, compared to $69 in 2025. With oil still overwhelmingly dominant in Iraq’s revenue structure, this price shift had immediate fiscal consequences.
Despite repeated government claims that customs reform would boost non-oil revenue collection, there was no meaningful increase last year. Non-oil revenues accounted for less than 12% of total revenues through November 2025, underscoring the continued structural dependence on hydrocarbons and the limited short-term impact of efforts to mobilize non-oil revenues.
On the expenditure side, the government was forced to introduce spending reductions last year, but the scale of adjustment was modest relative to the revenue shock. Total spending declined by just 7%, equivalent to roughly 10 trillion IQD. Operational spending fell by 6%, reaching just under 107 trillion IQD by November 2025. Capital spending declined by approximately 2.7 trillion IQD.
A significant portion of the reduction came from lower debt servicing obligations, with payment commitments reduced by 13%. The deficit reached just under 13 trillion IQD by November 2025, substantially exceeding the total 2024 deficit of 9.7 trillion IQD. To bridge the gap, the government resorted to increasing domestic borrowing, a concern highlighted by the Central Bank governor back in October last year, when he disclosed that the Sudani government had borrowed around 35 trillion IQD over a three-year period.
Public sector payroll spending remained largely unchanged due to a hiring freeze and represented 53% of total spending. Social security payments, totaling just under 6 trillion IQD, have also remained stable. However, pension expenditures increased by an additional 1 trillion IQD, reaching nearly 15 trillion IQD in total.
Taken together, salaries, pensions, and social welfare commitments absorbed approximately 81% of total oil revenues. This structural flaw explains why the government introduced emergency fiscal measures beginning in December, aimed at curbing costs and mobilizing additional non-oil revenues. These measures included the politically controversial decision to reduce salary allowances for holders of graduate degrees and to raise customs tariffs.
The fiscal squeeze has also intensified political tensions in parliament. In January, a cross-party group of lawmakers submitted a petition to summon Finance Minister Taif Sami for questioning over alleged violations in budget implementation and public fund management. However, efforts to hold her accountable have faced resistance, namely, from Asaib Ahl al-Haq’s Sadiqun bloc in parliament. The finance minister is married to Sadiqun’s bloc leader, Uday Awad.
Awad, who hails from Basra, has adopted a strongly populist posture. He has vocally opposed any attempt to cut public sector allowances and has rejected proposals to scale back the generous bonus structures within state oil companies.
While austerity measures are increasingly unavoidable, political incentives amid the ongoing government formation stalemate are discouraging reforms, despite the growing economic stress.