Iraq’s public finances changed sharply during the latest six-month reporting period. Official Finance Ministry accounts show a dramatic reversal across 48 federal spending bodies.
Economic expert Manar Al-Obaidy reviewed the figures and highlighted several serious structural pressures. The federal balance moved from a 5.29 trillion dinar surplus to a 21.24 trillion dinar shortfall.
Overall, that movement created a 26.53 trillion dinar deterioration between the two comparable periods. The Iraq budget deficit now exposes the country’s heavy dependence on oil income.
Total revenue fell 42 percent, from 62 trillion dinars to 35.95 trillion dinars. Most importantly, oil and mineral income fell by half, reaching only 28.51 trillion dinars.
Previously, those sources generated 57.05 trillion dinars during the comparable period. Consequently, government revenue covered only 62.9 percent of total spending.
Earlier, revenue had covered 109.3 percent and produced a healthy surplus—meanwhile, non-oil revenue increased 50.3 percent, reaching 7.44 trillion dinars.
Taxes on goods and production climbed 46.7 percent during the comparison. Profits from public companies also grew 18.3 percent.
Moreover, miscellaneous receipts more than doubled. Together, these improvements added 2.49 trillion dinars to state income.
However, that gain replaced less than nine percent of the lost oil income. Therefore, non-oil growth could not protect the budget from the petroleum shock.
Despite falling income, total expenditure increased 0.8 percent to 57.19 trillion dinars. Furthermore, current spending rose 3.6 percent and reached 54.67 trillion dinars.
The public payroll grew 2.5 percent, from about 30 trillion to 30.77 trillion dinars. Similarly, social protection spending increased six percent to 13.86 trillion dinars.
Together, salaries and welfare costs reached 44.63 trillion dinars. These two items consumed 78 percent of all government spending.
They also exceeded total revenue by almost 8.7 trillion dinars. Consequently, policymakers found little room for quick spending reductions.
Existing laws, public expectations, and household needs restrict sudden changes. However, long-term reform could gradually improve payroll control and spending efficiency.
Because operating costs stayed high, capital investment carried most of the fiscal adjustment. Investment expenditure dropped 36.3 percent to only 2.51 trillion dinars.
Education projects suffered a 71.5 percent reduction. Transport and telecommunications investment fell 56.8 percent.
Regional development funding declined 51 percent, reaching 760 billion dinars. Building and municipal services also lost 38.5 percent.
In contrast, industrial and energy investment increased ten percent. Officials therefore continued supporting oil and gas infrastructure.
Yet lower development spending can weaken roads, schools, services, and business growth. As a result, Iraq may struggle to expand its non-oil economy.
That outcome could preserve oil dependence and increase future budget risks.
Meanwhile, current debt service jumped 75.1 percent to 3.99 trillion dinars. The previous comparable period recorded only 2.28 trillion dinars.
The increase likely reflects heavier domestic borrowing and more treasury bill issuance. However, greater government borrowing can reduce available credit for private companies.
Rising debt payments also claim money that could support investment or essential services.
Spending patterns across major public bodies also changed. The Kurdistan Regional Government received 6.29 trillion dinars, marking a 21.6 percent increase.
Likewise, Finance Ministry spending increased 14.3 percent amid higher pension and debt costs. In contrast, Trade Ministry expenditure fell 19.8 percent.
The ministry cut some subsidies and grants from one trillion dinars to 410 billion dinars. Nevertheless, food basket allocations rose from 600 billion to 870 billion dinars.
The figures show that stronger tax collection alone cannot solve Iraq’s fiscal problems. First, authorities can remove duplicate payroll entries and improve employee records.
Next, digital tax and customs systems can reduce leakage and widen compliance. Moreover, lawmakers can protect productive investment during periods of revenue pressure.
They can also review subsidies while protecting vulnerable families. However, sudden payroll or welfare cuts could create serious hardship.
Therefore, officials need gradual reforms, clear communication, and reliable social protections.
Oil income still finances much of Iraq’s public sector. Non-oil revenue growth shows progress, but the gains still cover only a small share.
Meanwhile, expensive debt and weak investment could intensify future financial pressure. The Iraq budget deficit requires stronger revenue systems and disciplined spending.
