Shafaq News – Baghdad

Iraq could face a fiscal deficit of 70 to 80 trillion dinars ($53–61 billion) in 2026 if oil prices fall as projected, an Iraqi economist warned on Monday, citing the country’s heavy dependence on crude revenues.

Economist Ahmed Saddam told Shafaq News that Iraq is heading toward “a difficult financial crisis” next year, with international forecasts placing oil prices between $55 and $62 per barrel. Oil revenues account for more than 93 percent of the state’s income, leaving the budget highly vulnerable to any price decline.

Non-oil income remains limited, meanwhile, official data showed, as tax collection is weak, customs revenues are diminished by corruption and unofficial border crossings, and Iraq has few functioning revenue streams outside the oil sector. Public spending is dominated by salaries and entitlements, with more than 3 million public employees and around 4 million pensioners and social-welfare beneficiaries, making payroll obligations extremely difficult to reduce without political repercussions.

Read more: Without oil: Iraq's economic future hanging in the balance

Iraq’s current selling price of roughly $68 per barrel is already below the $81.6 breakeven level required to balance expenditures, according to a September assessment by Eco Iraq Observatory. Fitch Ratings likewise estimates that Iraq’s fiscal deficit will average 8.8 percent of GDP over 2026–2027, based on Brent crude at $65 per barrel.

If the government adopts a 2026 budget similar to the 210-trillion-dinar ($160 billion) plan approved for 2024 without major adjustments, Saddam warned, the resulting deficit would “force the government to restrict spending” to essential items such as salaries, social protection, and basic operating costs, leaving investment projects to absorb the deepest cuts.

He said the government could soften the impact by reducing nonessential expenditures, including allocations to the Three Presidencies (the President, Prime Minister, and Parliament Speaker), whose salaries total about 6 trillion dinars ($4.5 billion), in addition to another 6 trillion dinars in operating expenses.

Austerity measures, including reduced provincial allocations, could keep the deficit closer to 65 trillion dinars ($50 billion), Saddam said, though it would still remain substantial.