69 banks blocked by US red wax... and Baghdad is not the capital of Iran
From the Iraqi government negotiations in Washington
Baghdad is trying to save more than 30 new banks from expected US sanctions and convince Washington that Iraq is "not Iran."
The video for this My FX Buddies Blogpost is below here:
THE VIDEO HAD TECHNICAL ISSUES SO I HAD TO EDIT IT ABRUPTLY
On Saturday, Foreign Minister Fuad Hussein held negotiations in Washington that may pave the way for a meeting between al-Sudani and Trump.
Hussein met with his US counterpart, Marco Rubio, in the first meeting between senior officials from the two countries since Donald Trump took office in early 2025.
According to an Iraqi government statement, the visit focused on the Iranian gas file, as well as security and economic issues.
However, there may be other aspects of the foreign minister's visit that were not clearly announced, related to politics and the economy.
Protecting Funds and Banks
Ihsan al-Shammari, a researcher and academic, told Al-Mada about the visit that it coincides with the approaching end of the executive order issued annually by the US president to protect Iraqi funds, which expires after mid-May.
On May 22, 2003, former US President George W. Bush issued an executive order to protect the Development Fund for Iraq, in which oil sales revenues were deposited, with the aim of protecting them from any legal prosecution.
Therefore, Iraq is "very concerned," according to Al-Shammari, about the possibility that "Trump will not sign this executive order, and thus Iraq will lose its dollar reserves, as a result of lawsuits that may be filed against Iraq. Therefore, Iraq has officially requested the renewal of this protection with the president's signature."
The Development Fund for Iraq was established after 2003, and before that, the money from Iraqi oil sales was deposited in an account managed by the United Nations under the so-called Oil-for-Food Program.
Also on the economic front, Al-Shammari, a professor of strategic and international studies at the University of Baghdad, confirms that the visit is related to discussions on US sanctions on banks.
He traveled with the delegation with the Minister of Foreign Affairs, Minister of Finance Taif Sami, and the Governor of the Central Bank, Ali Al-Alaq.
Al-Shammari reveals that the number of Iraqi banks sanctioned by the United States has reached "37 banks," and according to indicators, the
number may rise to "69 banks."
He adds: "There is an American request to close the banks operating in Iraq with red wax, and what remains are four or six banks operating, according to information."
Therefore, Iraq wants to make America understand, as much as possible, that it is serious about "reforming the banking system," according to the professor of politics at the University of Baghdad.
Al-Shammari also points out that there is a problem with "prepaid cards," as the US Treasury found that "part of the work and activity of those who want to circumvent US sanctions is carried out through these cards."
Two weeks ago, news leaked that MasterCard and Visa cards had been suspended in Iraq, before the Central Bank denied the news.
Al-Shammari says that "Iraq needs more time to organize this process, because there is an American threat to stop dealing with transfers through prepaid cards."
Representatives had previously warned of US sanctions against Iraqi "financial institutions" involved in smuggling dollars to Iran and related to paying the salaries of the Popular Mobilization Forces.
"We are not part of Iran."
On the other hand, Al-Shammari, who also heads the Political Think Tank, believes that Hussein's visit to Washington coincided with the imminent appointment of a person responsible for the Iraqi file at the US State Department.
He says, "It seems that Iraq wants to be as close to Washington as possible, to at least explain its viewpoints or the nature of Iraq's orientations with America, even on some occasions."
Also, in terms of timing, the visit coincides with the US-Iranian negotiations. Therefore, according to the head of the think tank, Iraq wants "to avoid any conflation of the Iranian file with the Iraqi file."
He continues, "Baghdad wants to tell America to separate Iraq from Iran, because Iraq is a sovereign and independent country, and all the indications coming from Trump and his team confirm that he is not separating Iraq from Iran."
Al-Shammari asserts that Iraq does not want to be "a bargaining chip, part of a deal, or part of a clash" with Iran, and wants "the Iraqi foreign minister to understand these issues from his American counterpart and the political circles there."
Furthermore, Al-Shammari believes that the Iraqi foreign minister wanted to convey the desire of Mohammed al-Sudani, the prime minister, to visit Washington and meet with Trump.
Al-Shammari explained that Al-Sudani wants to prove that he is ready to work with Trump, and the visit may succeed in that, and may also succeed in "extending protection for Iraqi funds.
" Trump's conditions
However, in general, the researcher believes that the visit may not have major results, especially after the statements of the US Secretary of State, in which he called for Iraq to be an independent, sovereign country, free of "malicious activities," in reference to Iran and the factions, which may be interpreted as America's commitment to its previous conditions.
Al-Shammari added: "The visit remains subject to developments in the region, developments in the US-Iranian negotiations, and the Israeli-Iranian clash."
Al-Shammari pointed out that "it is not possible to build on a single visit, as the Trump administration is asking Iraq to take further measures."
It seems that Al-Sudani, according to Al-Shammari, is currently; "Unable to accept these conditions," which relate to dismantling the factions' weapons, severing ties with Iran (political, economic, and security ties), and halting currency smuggling, the government has also not made any progress on the issue of the Israeli hostage in Iraq, Elizabeth Tsurkov, whose release was one of the urgent demands of the US administration.
The Iraqi Foreign Ministry's statement about the visit revealed discussions regarding the strategic agreement between the two countries, and
Baghdad's request that Washington reconsider security warnings related to travel to Iraq.
Judgment is still early.
Meanwhile, former MP Mithal Alusi believes that it is difficult to judge the Trump administration's stance on Iraq and the region in its first three months, while the results may become apparent four years from now.
Alusi told Al-Mada, "America's current priority is the Iranian issue, and this issue is outside the influence of the US Departments of Defense and State. It is more or less in the hands of Trump and one or two of the president's advisors."
Al-Alusi added, "Trump personally has a vested interest in events in Gaza and Jordan, the economic, political, and security situation in Egypt, Lebanon and Syria, and most recently in Iraq."
Al-Shammari, a former member of the parliament's Foreign Relations Committee, described Iraq as "the last of the bunch and the last center of American interest," because it is influenced by US policy in Syria, Turkey, Jordan, and, of course, Iran.
Al-Alusi emphasized that "the best thing the Iraqi foreign minister could have done was to approach Washington directly, especially since the US embassy in Baghdad is still incapable, and is made up of the old, failed staff who understand less the US-Iraq relationship than the Iraqi-
American relationship through Iran.
This is where the danger lies."
Al-Alusi fears that the government's direct action against the State Department and Washington is an "almost desperate" attempt to salvage Iraq's position and protect it from the inevitable political and security turmoil on the ground if the US-Iranian negotiations fail or succeed.
He continues, "I had hoped, in addition to the State Department's efforts, to see an Iraqi political position. The Coordination Framework, which leads the government and holds exclusive power in parliament, was supposed to participate and send delegations to Congress and knock on the door of the US government, but these parties are waiting to see what happens from Iran and how things develop between Iran and the US."
MP warns: Delaying budget schedules threatens job stability
Representative Raed Al-Maliki warned, today, Friday, of the repercussions of the delay in sending the budget tables and not amending Article (14) of the General Budget Law, stressing that this delay will lead to real financial confusion affecting food security contract employees.
In a statement received by Al-Maalouma News Agency, Al-Maliki said, “Continuing this delay without a clear solution will create a major problem for a wide range of employees,” calling on the government and the Ministry of Finance to take urgent action to address the situation before it escalates.
He added, “We hold the government fully responsible for the financial chaos that could result from the delay in submitting the schedules, and we call on it to take swift steps to ensure the financial and administrative stability of contract employees.”
The government had previously announced that it would send the budget tables from the Ministry of Finance to the Council of Ministers after the Eid al-Fitr holiday, i.e. by mid-April, for a vote before referring them to the House of Representatives. However, they have not yet been submitted.
Iraq seeks to strengthen long-term economic partnership with Brazil
On Thursday, Minister of Commerce Athir Al-Ghurairi discussed ways to strengthen the economic and trade partnership with Brazil, signing a contract with his Brazilian counterpart, Geraldo Alckmin, during his visit to the country.
Al-Ghariri said in a statement received by Al-Akhbari: "The government is keen to expand cooperation with Brazil and strengthen economic partnerships with them."
He added that "the possibility of supplying the Brazilian side with shipments of Iraqi oil was discussed, within the framework of bilateral cooperation and meeting the Brazilian market's energy needs," stressing "the importance of building a long-term strategic partnership based on shared interests and mutual opportunities."
The Minister of Trade affirmed "Iraq's readiness to provide all possible facilities to Brazilian investors," calling for "the organization of a comprehensive exhibition of Brazilian industries in Baghdad to serve as a platform for promoting Brazilian products and expanding the base of trade and investment cooperation."
He pointed out that "there are significant opportunities, supported by sovereign guarantees provided by the Iraqi government to Brazilian companies, to encourage real partnerships with the Iraqi private sector."
A representative reveals the reason for the government's withdrawal of tax funds: The US Federal Reserve has stopped transferring funds to Iraq.
Iraqi parliament member Dr. Raed Hamdan al-Maliki described the United States' control over the transfer of Iraqi oil export revenues as "the greatest violation of the country's sovereignty," calling on the Iraqi government to tell the truth to the people.
In a tweet on his official X (formerly Twitter) account, followed by Iraq Observer, Maliki said that the government's withdrawal of tax funds and their use to cover operating expenses was due to the US Federal Reserve's suspension of oil revenue transfers.
He added, "It appears that the government's reason for withdrawing tax trust funds and using them to cover operating expenses is due to the US Federal Reserve's suspension of the transfer," referring to US measures restricting the movement of Iraqi funds held in international bank accounts.
Al-Maliki called for an end to this situation, saying, “This matter must end, and the government must tell the people the truth.”
The Council of Ministers had previously, in an official decision, authorized the Minister of Finance to withdraw tax deposits less than five years old to finance and pay salaries for April and subsequent months.
The Ministry of Finance is scheduled to deposit the amount later, as needed, for the state's total. Cash settlements will be made monthly upon request by reversing the deposit amount from the actual monthly revenues collected when conducting tax accounting, according to the decision.
These articles are from today SAT MAY 3 2025
Your deposits are safe: Iraq clarifies bank withdrawals
Iraq’s Finance Ministry dismissed allegations that recent withdrawals from state-owned banks involved citizen deposits, stressing that the transactions used sovereign funds and were carried out in line with federal budgetary procedures.
The ministry clarified in a statement that the funds withdrawn from Al-Rafidain and Al-Rasheed banks were held temporarily for “operational purposes” and reallocated according to administrative and financial instructions tied to the national budget.
The statement followed accusations by several lawmakers, local media outlets, and social media figures alleging that the government had accessed trillions of dinars from public deposits to address fiscal pressures. Some critics drew parallels to foreign banking collapses, prompting concerns over Iraq’s financial stability.
“These funds are not linked to individual accounts or depositors’ savings,” the ministry stated, rejecting the comparisons as “inaccurate and misleading.” It emphasized that Iraq’s banking sector operates under a distinct legal framework and is regulated by the Central Bank, which enforces strict compliance and governance measures.
Officials reported that Al-Rafidain and Al-Rasheed remain financially stable, continuing to disburse salaries, finance public projects, and fulfill obligations to clients. Al-Rafidain Bank holds approximately 9 trillion Iraqi dinars ($6.9B) in legal reserves with the Central Bank.
A document dated April 24 confirmed Al-Rafidain held 4.277 trillion dinars ($3.3B) in unused reserves and 4.263 trillion ($3.25B) in used reserves—totaling over 8.54 trillion dinars ($6.52B)—all of which remain intact, according to the ministry.
Addressing earlier embezzlement incidents, the ministry attributed those cases to prolonged dormancy in escrow accounts, which had been exploited by corrupt networks, noting that new oversight procedures had been introduced in coordination with state banks to strengthen controls and mitigate risks.
The ministry warned that continued dissemination of false claims could damage public confidence and distort perceptions of recent economic progress, highlighting that Iraq’s fiscal reforms and improved transparency had received praise from international institutions, contributing to better credit ratings and increased investor engagement.
Reaffirming its economic policy direction, the ministry called on media professionals and social media users to verify claims and act responsibly. “All official data remains accessible for professional and public review through the ministry and banking channels.”
Rafidain Bank: There are no indications of any liquidity crisis or banking panic.
Rafidain Bank confirmed on Saturday that its financial position is strong and solid, with a legal reserve of more than 8 trillion dinars deposited with the Central Bank of Iraq. The bank also indicated that there are no indications of any liquidity crisis or banking panic.
In a statement seen by Al-Eqtisad News, the bank said, "Rafidain Bank is not just a bank, but a sovereign pillar of the state's economy. Since its establishment in 1941, it has remained steadfast in serving citizens and the state, overcoming all economic and political crises without any hesitation in fulfilling its obligations. It is not just a financial institution, but an extension of the state's identity and a center of trust for more than 12 million citizens.
" The bank stressed that "talk about 'deposit differences' is incomplete and misleading," explaining that "bank deposits are not held as raw cash, but are managed within a precise banking operating system that includes: retail loans, government bonds, small project financing, and liquidity investment according to financial safety standards. Circulating information outside this context confuses public awareness and undermines confidence."
He added, "There are no indications of any liquidity crisis or banking panic," stressing that "Rafidain Bank's financial position is strong and solid, with a legal reserve of more than 8 trillion dinars deposited with the Central Bank of Iraq. Liquidity is available, deposits are secure, and there are no emergency withdrawal requests or operational irregularities."
He pointed out that "the bank's reputation is not just a brand name, but a national asset. We realize that banking reputation is not measured solely by assets, but by the depth of the relationship between the bank and its community. Rafidain has maintained its commitment to citizens in the most difficult circumstances, and today it embodies the financial confidence of the Iraqi state."
He continued, "We do not accept comparisons with banking collapses in other countries," explaining that "comparisons between Rafidain Bank and banks that have collapsed in other countries lack objectivity. Rafidain is not exposed to foreign markets, does not carry speculative debts, and operates under the direct supervision of the Central Bank of Iraq, with a clean record of obligations."
The bank warned of "the danger of being dragged into political and media controversy," stressing that "the banking sector cannot tolerate smear campaigns or fragmented rumors, and ill-considered skepticism may create a disturbance in public confidence, which we warn against and reject. There is a difference between professional criticism and irresponsible media escalation."
It continued, "It has undertaken radical and strategic reforms to return to the international arena, including initiating a comprehensive modernization of its systems:
• Contracting with EY and K2 Integrity to develop governance and compliance.
• Adopting the global banking system Oracle Flexcube.
• Operating modern AML and KYC systems.
• Opening international correspondence channels in preparation for a confident return to the global financial system.
" The statement concluded, "We are not asking for special protection, but we ask that the bank be left outside circles of controversy. It is an institution for all Iraqis, and its silence in the face of crises does not indicate its weakness, but rather its maturity and loyalty to the people. Let us preserve what remains of trust in state institutions."
Desperate measures: Iraq uses escrow funds to pay wages
Iraq is facing a severe liquidity crisis that could delay public sector salaries and lead to the cancellation of the 2025 federal budget, officials and lawmakers warned on Saturday.
Thaeer Mukheef, a lawmaker from the State of Law coalition, revealed that the government’s cash flow was “severely constrained,” confirming that funds held in tax escrow accounts had been tapped to pay salaries. He defended the move as “legal and necessary to avoid unrest over delayed wages.”
The Finance Ministry acknowledged withdrawals from state-run Al-Rafidain and Al-Rasheed banks but stressed that only sovereign accounts were accessed. In a statement, it rejected claims that public deposits or insured balances were touched, describing the transactions as “routine fiscal reallocations” permitted under the federal budget law.
Separately, a government source said the Cabinet is considering scrapping the 2025 budget altogether due to a widening fiscal deficit. Finance Minister Taif Sami reportedly told ministers that oil revenues were insufficient to cover anticipated spending.
“The draft has not been formally submitted, but the revenue gap is substantial,” the source added, adding that certain personnel entitlements—such as promotions and allowances—could still be issued through executive decrees.
Jamal Kocher, a member of the parliamentary finance committee, warned that the budget’s baseline assumption of $70 per barrel of oil could prove untenable. “If crude drops below $60 and no revisions are made, salaries alone may consume the entire revenue stream.”
An economist proposes solutions to address the liquidity shortage in Iraq.
Financial and economic affairs expert Ahmed Abdel Rabbo proposed solutions on Saturday to address the liquidity crisis in Iraq, after the Iraqi government withdrew funds from tax deposits. He pointed out that Al-Sudani's government needs a firm will to make bold decisions to prevent the country from sliding into a stifling cash crisis.
Abdel Rabbo said in a press statement followed by (Al-Mada) that "after withdrawing 3.045 trillion dinars from tax deposits to cover salaries, the liquidity crisis in Iraq appears more urgent than ever, which requires urgent government action with a balanced financial formula."
He added, "Unnecessary expenditures must be rescheduled and non-urgent projects, such as bottleneck projects, postponed to direct resources towards top priorities, and short-term government bonds must be issued to the Central Bank and local banks as a quick internal solution without getting involved in external debt."
He explained that "among the quick solutions are tightening control over foreign bank transfers, regulating the sale of dollars, restoring confidence in local banks, and launching urgent tax collection campaigns targeting large arrears from companies and importers to boost non-oil revenues."
The financial and economic expert stressed the need for "immediate diplomatic action with Washington to ensure the continued flow of oil revenues without disruption or delay, in addition to offering savings bonds to citizens with incentives to attract the dormant cash flow outside the banking system."
Abdel Rabbo concluded by saying, "At such critical moments, Al-Sudani's government does not need lengthy deliberations, as much as it needs a firm executive will, capable of making bold decisions that preserve the financial balance and prevent the country from slipping into a stifling currency crisis, the repercussions of which could accelerate within weeks."
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Al-Maliki warns: Delaying the submission of budget schedules will disrupt the financial situation.
MP Raed Al-Maliki held the government fully responsible for what he described as the financial chaos that could result from the delay in submitting budget schedules. He stressed that this delay would lead to real financial confusion affecting food security contract employees.
In a statement seen by Al-Masry Al-Youm on Saturday, he called for swift steps to ensure financial and administrative stability for contract employees.
Al-Maliki pointed out that "continuing this delay without a clear solution will create a major problem for a wide range of employees."
The truth about the withdrawal of Rafidain and Rashid funds: sovereign funds, not citizens'
The Iraqi Ministry of Finance stressed on Saturday that the funds withdrawn from the government-run Rafidain and Rashid banks do not represent citizen deposits or the banks' insurance balances. Rather, they belong to the ministry's sovereign accounts, were kept as a temporary operating tool, and were transferred back in accordance with financial and administrative instructions to be allocated within the general budget.
In an official statement received by Shafaq News Agency, the ministry confirmed that some media outlets, social media platforms, and a number of MPs had circulated false information, as part of what it described as the promotion of lies and rumors for political and electoral motives. It considered this a form of electoral rhetoric that lacks moral responsibility.
The statement added that comparing these measures to experiences of banking collapses in other countries is inaccurate, ignoring the unique legal and regulatory structure of the Iraqi banking sector, which is subject to the Central Bank's oversight and strict compliance and governance regulations.
The statement indicated that Rafidain and Rashid Banks maintain high liquidity and cash reserves that exceed the established ratios, and that they regularly perform their duties in disbursing salaries, financing projects, and fulfilling obligations to customers. It also indicated that Rafidain Bank's legal reserve at the Central Bank amounts to approximately 9 trillion Iraqi dinars.
The ministry noted that the latest letter issued by the Central Bank, dated April 24, confirmed that Rafidain Bank's unused reserves amounted to 4 trillion and 277 billion dinars, while its used reserves amounted to 4 trillion and 263 billion dinars, for a total of more than 8 trillion and 540 billion dinars, without any harm to them.
The statement explained that the thefts that previously affected some trust accounts were due to funds remaining idle for extended periods, allowing corrupt networks to exploit loopholes. It confirmed that new oversight measures have been implemented in coordination between banks and the Ministry of Finance to mitigate risks.
The ministry called on citizens to be aware and discern the motives behind political misinformation, warning against attempts by some parties to distort the facts and distort government performance.
She emphasized that the levels of economic transparency and reforms adopted by the government have been praised by international financial institutions and have contributed to raising Iraq's credit rating and attracting global investment.
The Ministry of Finance emphasized the government's commitment to continuing its economic reform approach and strengthening financial and banking management. It called on media professionals and social media users to exercise accuracy and assume national responsibility, affirming that the doors of the ministry and banks are open for professional review of official data and reports.
The Iraqi economy and the risks of limited diversification
Dr. Haitham Hamid Mutlaq Al-Mansour
The Iraqi economy is experiencing a gap between the government's efforts to promote growth on the one hand, and the structural challenges that hinder growth and stability on the other. Although Iraq possesses enormous oil wealth, ranking third in the world in oil reserves, its near-total dependence on crude oil exports, which account for more than 90% of general budget revenues, makes it vulnerable to global market fluctuations and hinders the diversification of its production base. This limits its resilience to external shocks and limits the national economy's response to reform requirements.
Overall activity indicates that the Iraqi economy is witnessing development in oil production infrastructure, such as joint ventures with international companies in the Majnoon and West Qurna fields, for example. This has led to an increase in total production to approximately 3.5 million barrels per day since the end of 2023, with plans to reach 5 million barrels in the coming years. This is in addition to improved resource management following the approval of the Oil and Gas Law, which has not yet been fully implemented. Meanwhile, we are witnessing an expansion in investment in reconstruction projects in cities such as Mosul and Basra, supported by foreign investment, particularly from the Gulf, and the development of the Grand Faw Port, a strategic project to stimulate foreign trade.
On the other hand, we see a limited trend toward diversification in a few sectors, limited to limited government plans for developing agriculture and industry, such as supporting local production in the food sector, and the launch of the National Development Strategy 2020-2030, which witnessed weak implementation according to the World Bank's assessment. In terms of international economic relations, the use of the Chinese yuan instead of the dollar in oil trade with China is noted, as are agreements with neighboring countries such as Jordan, Egypt, and Saudi Arabia to establish joint industrial zones.
But one of the most prominent challenges facing economic growth and economic reform in general is the scourge of financial and administrative corruption. Iraq ranks low on the Transparency International Index (ranked 154th out of 180). According to World Bank estimates, 30% of the budget is eroded annually due to corruption. Meanwhile, the employment index suffers from high levels of unemployment and disguised unemployment. The unemployment rate exceeds 15%, reaching 30% among youth. This is due to increasing levels of public spending, its high contribution to total employment, and the prevalence of disguised unemployment among more than 4 million employees. Inflation is also expected to rise to approximately 7% by the end of 2024.
After oil prices witnessed a decline due to global demand resulting from the slowdown in Chinese growth and the rise in US interest rates, this affected budget revenues and increased the 2024 budget deficit, which was approved at 198 trillion dinars (about $152 billion), with an expected deficit of 48 trillion dinars (24%), increasing reliance on domestic borrowing. This brought the domestic public debt to 80 trillion dinars (about $55 billion). Due to the inflation rate, which rose to 7.5% in 2024 compared to 6% in 2023, the value of the dinar decreased against the dollar with the increase in demand for imports due to the lack of flexibility of the local production base. Therefore, the Central Bank took measures to raise the interest rate to 7.5%, in addition to raising the legal reserve ratio from 15-18% and tightening controls on dollar transfers to combat smuggling and money laundering. Not long ago, the Central Bank's foreign reserves were also witnessing a significant decline, according to the bank's own statistics. The decline reached $7.5 billion as a result of compensatory sterilization measures to mitigate the decline in dollar supply on the parallel market, posing a threat to the government's long-term inflation shield.
Given the real distortions in the Iraqi economy that affect the structure of aggregate demand, spending, and investment, with serious repercussions for the business sector, and in light of the limited government interventions and the expected continued decline in global oil prices, one of the important steps to ensure the success of the economic reform process is to emphasize the reduction of rentierism through the following:
Develop a foreign investment strategy in specific, productive sectors, with a clear plan, objectives, and tools for investment, implementation, oversight, and anti-corruption, including the oil, petrochemical, extractive, and mining sectors.
Strengthening the investment strategy by issuing a package of laws that attract foreign investment and implementing real reforms to raise the expected level of marginal capital efficiency, which will directly impact the movement and direction of private capital and increase its productivity in the sectors mentioned in the first point.
Directing oil revenue savings to investments in infrastructure, education, health, housing, industry, and agriculture, and expanding the scope of derivative investments.
Rationalizing public spending policy and taking measures to ensure financial control and financial sustainability of the depleting economic resource, and coordinating with monetary policy to reform the banking sector and facilitate investment financing through banks to achieve stability and growth.
These signals are likely to achieve economic reform in the financial and real markets, and subsequently increase economic growth through financial compensation from investment returns, reducing the general budget deficit, and enhancing the government's ability to expand non-oil GDP and absorb external shocks. This will then increase the sustainability of domestic public debt and achieve low and stable inflation. Otherwise, the Iraqi economy will reach a crossroads: either embark on diversification and stability, or continue its dependence on oil, with the risks of rents and instability.
2025 budget schedules expected to be postponed amid government preoccupation with the Arab Summit.
State of Law Coalition MP Mukhtar al-Moussawi ruled out on Saturday (May 3, 2025) the possibility of the government sending the 2025 budget schedules during the current month of May, despite the significant developmental and financial importance of those schedules, warning of negative impacts on projects and salaries.
Al-Moussawi told Baghdad Today that "the 2025 budget tables represent a roadmap for financing ministries and local governments across multiple sectors, in addition to securing financial coverage for the dues of a large number of categories in ministries, institutions, and government agencies." He stressed that "until this moment, there are no objective reasons for the delay in sending it by the government to the House of Representatives for the purpose of scrutiny and voting on it."
He added, "The political situation in Baghdad is almost turbulent, and the government appears preoccupied with several other concerns, most notably preparations for the Arab League summit scheduled for mid-month, making it unlikely that the budget schedules will be submitted in May."
He pointed out that "the budget delay has a significant impact on local government efforts and project funding entitlements, as well as the coverage of entitlements for a large number of employees," emphasizing that "the delay has negative repercussions, and there is no realistic justification for its continuation to date."
Last year, the Iraqi government approved a three-year budget (2023–2025), the first of its kind since 2003, with the aim of ensuring financial planning stability and facilitating project implementation in the medium term. However, the implementation mechanism requires the submission of "annual tables" specifying the distribution of expenditures and revenues by ministry and governorate, a requirement that has not yet been met with regard to the 2025 budget.
The delay in submitting the schedules to Parliament constitutes a breach of established deadlines and hinders the completion of infrastructure projects and service plans, which governorates rely on to prepare their financial and development plans, especially as the second half of the fiscal year approaches without a clear vision for funding.
Withdrawing tax deposits is a "catastrophe." A representative said the US Federal Reserve reduced dollar grants to Iraq by 30%.
Iraqi parliament member Ali Al-Mashkoor revealed on Saturday, May 3, 2025, that the US Federal Reserve has reduced dollar grants to Iraq by nearly 30%, while describing the withdrawal of tax deposits as a "disaster and a disaster."
In a televised interview followed by Al-Jabal, Al-Mashkur said, "Withdrawing tax deposits confirms the state's need for financial liquidity, and is a disaster and a source of confusion." He explained that "the government's action regarding tax deposits cannot be compared to the theft of the century."
He added, "The state does not have the right to withdraw all tax deposits. There are complaints in this regard, and withdrawal must be linked to a judicial decision."
He pointed out that "the three-year budget with the fixed high oil price was a bad year," asking, "If oil sales were proceeding according to the decree, why all the fuss? The government is now needed in the oil-producing provinces."
Al-Mashkoor said, "The US Federal Reserve has rationed the dollar to Iraq by approximately 30%."
Mazhar Mohammed Salih, the Prime Minister's financial advisor, outlined the reasons behind the Iraqi government's withdrawal of funds from tax trusts, which he described as part of the budget that could be used to adjust government spending. He also spoke of "fear" of entering a phase of economic contraction.
Saleh said, "The world is living in a state of anticipation for fear of entering a phase of economic contraction, and then the Great Depression. This phase lasts six months during which growth and unemployment levels in the global economy are monitored." He pointed out that "Iraq is an important part of the world's energy system. A 1% drop in the world's GDP leads to a half-percent drop in oil demand, which leads to a supply glut, which requires a cautious policy from OPEC+ to help the group's countries protect their financial budgets for 2025 and the beginnings of the next fiscal year, 2026."
He added, "There is a precise technical hedge to confront the oil asset cycle, which the legislator assumed when approving the three-year federal general budget (Law No. 13 of 2023, as amended), by adopting a conservative oil price of $70 per barrel of exported oil, based on exporting 3.4 million barrels of oil per day." He explained that "this hedge is in two directions: the first is spending with a comfortable budget, but at the minimum possible limit of 160 trillion dinars annually instead of 200 trillion dinars annually, and the second direction: spending at the maximum limit while hedging with a maximum annual deficit of 64 trillion dinars."
Saleh continued, "In the 2024 budget, spending was within the comfortable minimum of 156 trillion dinars, with an average oil price of around $75 per barrel. This spending covered the entire operating budget, including salaries, wages, pensions, social care, and support, in addition to spending on more than 8,000 suspended government investment and service projects." He pointed out that "government borrowing, most of which is from domestic borrowing sources, recorded a financing indicator in the budget deficit of 7.6% of GDP, compared to 1.3% in 2023."
He pointed out that "if oil prices fall to an annual average of $60, which is the maximum possibility in the 2025 budget, there are two options: either spending around 130 trillion dinars and keeping the deficit financing ratio to GDP the same as in 2024, or spending up to a ceiling of 156 trillion dinars and accepting actual borrowing in bonds that rises to 9% of GDP in order to secure salaries, wages, pensions, social care, support and spending on service projects without interruption, taking into account the drop in oil prices and the contraction in GDP growth in a double manner ."
Saleh pointed out that "these are the expected possible options unless the oil asset cycle improves, which in all cases depends on the upcoming OPEC+ policies regarding the future of production limits and the review of member quotas, as well as the development of the geopolitical situation in the world, especially in the Ukrainian-Russian war and the development of the situation in the Mediterranean Basin region, as the Gulf region is responsible for exporting nearly 40% of global crude oil exports, and this is reflected in the fluctuations of energy prices in global markets, including crude oil markets."
He explained that "adjusting spending, including the issue of covering tax credits, which are quasi-entitlements to the general budget, falls within the framework of what is known as fiscal space, which is the amount of financial resources available to the fiscal authority to ensure government spending (specifically on salaries, wages, pensions, social care, and infrastructure) without harming financial stability in the medium or long term."
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