Shafaq News

Economic assessments differ over Iraq’s ability to overcome its current liquidity crisis, while concerns grow among public sector employees over delayed salary payments.

As of January 29, government salaries had not been disbursed, despite payments typically being issued between the 20th and 25th of each month, fueling frustration and anxiety among state employees. An informed source attributed the delay to a “shortage of cash,” despite the completion of payroll lists and funding procedures, citing limited liquidity in government banks as the main cause of the disruption.

Read more: Iraq can fund salaries, but oil sets the limits

According to an official document from the Finance Ministry, a directive issued by the minister instructs all departments and branches to maintain working hours during and beyond official times until salary distribution is completed. Meanwhile, the federal Finance Ministry announced that it has begun releasing salary funding for state institutions, ordering payments to be made in batches.

Economic analyst Nabil Al-Marsoumi warned of widening financial instability and the persistence of the salary crisis in the absence of a fully empowered government.

Speaking to Shafaq News, he cautioned that a potential US veto over the appointment of Nouri al-Maliki as the next prime minister could delay approval of the 2026 federal budget. “Iraq, in all cases, needs a new government to replace the caretaker cabinet,” he said, warning that continued delays would intensify economic and financial disruption.

Al-Marsoumi noted that failing to form a new government would leave the caretaker administration without legal authority to borrow from state banks, and that recent salary delays could continue in the coming months and may worsen.

On the possibility of resolving the financial crisis without a rise in oil prices, the analyst said, “There is no real hope.”

While prices are currently approaching $70 per barrel, he described the increase as temporary and tied to geopolitical tensions, predicting prices will fall once regional security conditions stabilize. He also stated that any potential boost in oil revenue would not reach Iraq for at least two months, increasing financial risks amid the absence of a fully authorized government. 

Read more: Oil revenue volatility exposes Iraq’s budget vulnerabilities

Meanwhile, caretaker Prime Minister’s adviser Muthir Mohammed Saleh told Shafaq News that the government can legally resort to borrowing if the federal budget is not approved and a temporary liquidity shortage occurs, provided the borrowing is limited, short-term, and strictly allocated to essential spending.

“Such borrowing could be used to cover priority obligations, including salaries, pensions, and social welfare payments, under the Federal Financial Management Law No. 6 of 2019, in line with Article 29,” Saleh explained, stressing that borrowing in this context must remain domestic, short-term, and excluded from long-term commitments or new investment spending, with repayment to follow after budget approval.

“Ensuring the continuity of salary and pension payments is vital to economic and social stability and strengthens public confidence in fiscal and monetary policy,” Saleh noted, including that temporary financing tools such as treasury advances or limited domestic borrowing can be used as long as they do not evolve into permanent financial obligations. 

Read more: Iraq’s economic “perfect storm”: Experts warn the crisis is structural and social