Iraq’s largest-ever budget faces roadblocks, threatening economic stability and project execution

Shafaq News/ Iraq’s landmark three-year budget, approved in June 2023, was set to provide a forward-looking financial framework for 2023-2025, but delays in finalizing key provisions and adjusting budget tables are threatening the country’s economic planning and project implementation.

Iraq's Historic Budget

In June 2023, Iraq's Parliament approved a three-year general budget for 2023, 2024, and 2025, marking the largest budget in the nation's history at approximately $153 billion annually. The Kurdistan Region is allocated 12.6% of the total.

Despite its ambitious three-year scope, the budget has faced delays that are hindering its execution, leading to a situation where the intended multi-year plan has become, in practice, a series of annual budgets.

Budget Delays Impact Projects

In June 2023, Iraq's Parliament approved a 2023 budget of 198.9 trillion dinars ($153 billion). In June 2024, the Iraqi Council of Representatives (CoR) approved the country’s 2024 budget of 211.9 trillion dinars (approximately $162.9 billion).

"While countries aim to have their public budgets ready by January 1st, launching at the start of the year and concluding at year-end, the situation in Iraq is different, as budgets are often delayed for long periods," said economic expert Abdul-Hassan Al-Ziyadi.

Al-Ziyadi told Shafaq News that "the public budget tables (revenues, spending, and deficit data) in Iraq are usually delayed by months, sometimes even a full year, despite their crucial reliance, causing significant issues for the budget itself, the public, and all who rely on it."

The delay in the release of budget tables affects all projects. According to Manar Al-Abidi, executive director of the Iraq Future Foundation for Studies and Economic Consultations, "Delays disrupt the budget, particularly since this year marks the final year of the three-year budget."

Al-Abidi explained to Shafaq News that a delay in the 2025 budget would halt the entire process, especially since the 2023 and 2024 budgets are incomplete. This will lead to further disruptions in the budget and its core objectives."

“These delays, which may push key projects into 2026, are compounded by the need for adjustments in the budget’s allocation to ensure that objectives are met in the coming years,” explaining that 2025 is an election year to form a new government to set the budget. “Based on past experience, this process can take anywhere from six months to a full year, resulting in another issue in 2026 when the new budget may not be approved due to a new government."

Regarding the fate of the 2025 projects, Al-Abidi noted, "If the projects are not approved in the 2025 budget, they cannot be carried over into the 2026 budget, as it is a three-year budget. The Financial Management Law stipulates that if the budget is not approved or there is no budget in a fiscal year, only 1/12 of operational expenditures can be spent, halting investment projects."

Budget Adjustments Needed

The evaluation of government performance relies on data from the Planning and Finance ministries, and the process of revising allocations for provinces and federal ministries to align with objectives requires analytical tables.

According to financial and economic expert Dr. Safwan Qusay, the budget law does not show significant differences between the 2023, 2024, and 2025 budgets, indicating the need for reworking certain budget items to enable accountability for ministry performance.

In an interview with Shafaq News, Qusay pointed out that "Prime Minister Al-Mohammed Shia Al-Sudani's government is focusing on covering the service and infrastructure sectors first. There have been efforts to implement these projects, some of which were completed ahead of schedule. This means additional projects could be included to complete 2024 and begin spending on them in 2025."

He further noted that "The issue of oil production in the Kurdistan Region, along with extraction and transportation costs, needs to be adjusted to around $16 per barrel. Some budget items can also be modified to match the scale of the goals for the coming year. If certain projects are not funded within the budget, they may be shifted to investment."

Qusi concluded by stating, "The Financial Committee seeks to review the supplementary tables and update certain items, which will be discussed with the Ministry of Finance before being approved. This process is intended to result in a stable budget for the 2025 legislative session, as financial stability impacts both fiscal and developmental stability."

Budget Adjustments Await Approval

Member of the Iraqi Parliament's Finance Committee, Moeen Al-Kazemi, clarified that "the government was supposed to submit the budget tables, especially since this budget lacks specific provisions except for Article 12, Section (C), which includes a recalculation of the cost of producing and transporting crude oil from the Kurdistan Region, now estimated at $16 per barrel."

Al-Kazemi told Shafaq News that "these numbers differ from the 2023 budget, which used southern oil production as a benchmark. However, as noted, the cost of producing oil in Kurdistan is higher than in the south. This adjustment is the first step, and next week, the issue will be presented to the Finance Committee in the Iraqi Parliament for review, first and second readings, followed by a vote on the amendment."

This amendment, according to Al-Kazemi, will impact the budget tables, particularly operational costs, as the cost of crude oil production is included in the operational budget. “This will lead to adjustments for the 400,000 barrels per day exported from Kurdistan. This is the reason for the delay in submitting the 2025 budget tables."

He explained that the delay in sending the budget tables is due to the need to amend Article 12, which will allow the government to finalize the tables. “The amendment will affect operational numbers; otherwise, the Ministry of Finance could calculate the required operational expenses for 2025, while the Ministry of Planning estimates the costs for ongoing and new projects in provinces and ministries."

"The Finance Committee believes that the budget for 2025 should be based on revenues not exceeding 150 trillion dinars, with 120 trillion allocated for operational costs, including oil production, and 30 trillion for investment in provincial and ministry projects."

Al-Kazemi noted that If the tables are not submitted, the expenditures from 2024 could be carried forward, as the budget is a three-year budget. However, the amendment to Article 12, Section (C), requires the government to make this adjustment and for the Parliament to approve it before the budget tables can be submitted."