Shafaq News

Iraq’s economy followed a complex trajectory in 2025, marked by strong oil revenues alongside persistent structural weaknesses, uneven progress across productive sectors, and delays in long-awaited reforms.

Oil remained the backbone of public finances, continuing to shape economic decision-making as the government sought to balance fiscal stability with growing domestic and external pressures. Economic management throughout the year reflected a close overlap between political and economic considerations, limiting policy flexibility in areas such as energy, salaries, and international partnerships.

Oil and Gas: Major Contracts and Sensitive Shifts

The oil sector dominated economic activity in 2025, amid global price volatility and Iraq’s production commitments under the OPEC+ alliance, a group of major oil-producing countries that coordinates output levels.

The year began on a positive note. On January 20, the Midlnad Oil Company announced, in cooperation with China’s EBS, a major oil discovery in the southern part of the East Baghdad field, estimated at around two billion barrels.

Pressure soon followed. On March 28, Iraq proposed cutting spending by international oil companies operating in the country by 30 percent after a sharp drop in global prices, while maintaining production levels.

Mid-year developments included the signing of a memorandum of principles to develop the Hamrin oil field with US-based HKN Energy, the launch of construction works for the Nineveh refinery with a capacity of 70,000 barrels per day, and a contract with US firm Schlumberger to develop the Akkas gas field, raising output to 100 million standard cubic feet per day.

In September, Iraq signed a joint operating agreement for the Gas Growth Integrated Project (GGIP) at the Artawi field in Basra with TotalEnergies and QatarEnergy. The project was described by officials as one of the country’s most significant integrated oil, gas, and clean energy initiatives. During the same period, crude oil exports through the Kurdistan Region pipeline to Türkiye resumed for the first time in more than two and a half years.

On October 4, the Oil Ministry signed a contract with US-based Excelerate Energy to implement a floating liquefied natural gas (LNG) platform in Basra. Under the agreement, Excelerate will supply Iraq with its first floating storage and regasification unit, scheduled for delivery on November 2.

The ministry also announced the activation of a contract with BP to develop four major oil fields in Kirkuk — Baba and Avana, Jambur, Bai Hassan, and Khabbaz — alongside the rehabilitation of North Gas Company facilities to boost gas production.

The sector faced setbacks as well. Russia’s Lukoil declared force majeure at the West Qurna-2 oil field due to US sanctions, prompting Baghdad to later invite American oil companies to manage the field.

In a notable development, Iraq announced on November 4 that it had halted imports of gasoline, diesel, and kerosene after achieving self-sufficiency. The move paved the way for Iraq to become an exporter of refined petroleum products, a goal that had been delayed for years.

On December 1, the Oil Ministry issued direct invitations to several major US oil companies to enter negotiations and submit technical and commercial bids to compete for managing West Qurna-2.

Electricity and Energy: Missed Opportunities

Despite limited progress in regional electricity interconnection, including an agreement signed in April to double power imports from Turkiye from 300 to 600 megawatts, Iraq recorded a major setback in its attempt to import gas from Turkmenistan via Iran. The project stalled under direct US pressure, leaving the country facing severe electricity shortages during the summer.

In contrast, the Ministry of Electricity launched Iraq’s first waste-to-energy project in the Nahrawan area of Baghdad, with a planned capacity of 100 megawatts per day, combining environmental and economic objectives.

Public Finances Under Pressure

Public finances faced mounting challenges in managing spending and deficits amid near-total reliance on oil revenues.

In February, the Ministry of Finance issued Iraq’s first national bonds worth two trillion Iraqi dinars, seeking to broaden domestic financing tools. In March, the ministry announced the outcome of meetings with the International Monetary Fund, which emphasized the need for banking sector reform and expanded ties with correspondent banks.

Political pressure became evident in July with delays in paying salaries to fighters of the Popular Mobilization Forces (PMF), a state-recognized coalition of predominantly Shiite armed groups. Officials cited technical reasons, while other accounts pointed to external pressures.

In December, the government suspended new appointments, promotions, and allowances until the approval of the 2026 federal budget, signaling tightening fiscal space.

Central Bank: Policy Shifts and Higher Gold Reserves

Monetary policy also saw significant changes. In January, the Central Bank of Iraq announced the termination of its electronic platform for dollar sales, while maintaining a mechanism for travelers.

In August, Iraq raised its gold reserves to 171.9 tons, retaining its position as the world’s 29th largest holder, a move seen as strengthening monetary stability.

In December, the Supreme Administrative Court approved the cancellation of a decision requiring real estate purchases to be deposited in banks, a ruling described as a legal victory for citizens.

Trade and Agriculture: Relative Improvement

Agriculture emerged as one of the most positive sectors in 2025. Iraq achieved a wheat production surplus, with marketed quantities exceeding five million tons for the third consecutive year. The Ministry of Agriculture banned imports of more than 40 products to support self-sufficiency and expanded date exports to Asian and European markets.

Investment activity included the granting of 252 agricultural licenses and the approval of one of the largest seasonal agricultural plans in government history. Iraq also participated in the FAO global exhibition “From Seeds to Foods,” aiming to link local products to international value chains.

Planning, Reconstruction, and Development

The 2025 population census was described by the prime minister’s financial adviser Muthar Mohammed Saleh as the most significant economic and developmental event of the year, providing a comprehensive database to guide public policy and improve spending efficiency.

Saleh told Shafaq News that “the census is not merely a statistical exercise but a sovereign planning tool that enables the state to shift from estimating resources to managing them based on knowledge.”

Iraq’s population reached approximately 47 million in 2025, with an annual growth rate of about 1.99 percent. The Human Development Index rose to 0.695, reflecting gradual improvements in education and health compared with previous years.

The Ministry of Construction and Housing completed 199 projects across roads, bridges, water, sewage, and housing sectors. Ministry spokesperson Nabil Al-Saffar told Shafaq News that several traffic congestion relief projects in Baghdad, including bridges and overpasses, were opened or fully completed during the year.

Internationally, the World Bank announced $930 million in financing for Iraq, including support for the Development Road project, while the prime minister launched an investment opportunity package valued at $450 billion across multiple sectors.

Credit rating agency Fitch rated Iraq at “B-,” citing heavy dependence on oil and weak governance, and warning of delays to the 2026 budget, while noting continued internal stability.

Despite tangible achievements in oil, refined products, agriculture, and population data, economic gains in 2025 did not translate into a clear improvement in living standards, as price pressures, unemployment, and service shortcomings persisted.

Written and Edited By Shafaq News Staff.