Shafaq News – Baghdad

Iraq’s budget recorded a fiscal deficit exceeding 7.5 trillion dinars ($5.2B) in the first half of 2025, the economic observatory Eco Iraq reported on Saturday, warning that the government faces limited options to contain the gap.

Oil accounts for more than 90% of total revenues, with official data from January to June showing 56.7 trillion dinars ($39.6B) in oil income out of 62 trillion dinars ($43.3B) in overall revenues. Actual expenditures reached 69.5 trillion ($48.6B) dinars, including 3.1 trillion dinars ($2.17B) for the Iraq-China agreement and 7.5 trillion dinars in licensing round payments.

Eco Iraq cautioned that the deficit poses serious challenges for fiscal stability and urged the government to cut operational spending not tied to salaries and wages. It stressed that higher oil prices cannot be relied upon, noting that Iraq currently sells oil at about $68 per barrel while a price of $81.6 is needed to balance the budget.

Iraq continues to rely heavily on oil revenues to finance its federal budget, a strategy that international organizations and economic experts say puts the country at serious financial risk amid declining global oil prices.

In July, the International Monetary Fund (IMF) cautioned that Iraq faces a widening medium-term deficit due to falling oil prices and tightening financing conditions, with the breakeven oil price required to balance the budget surging by more than 55%. The IMF projected that oil revenues will drop from 36% of GDP in 2024 to 31% in 2026, while public spending will rise from 43.5% to 43.8%, driven mainly by wages and pensions, which are expected to reach 24.5% of GDP by 2026.