Iraq faces looming fiscal crisis amid oil revenue decline
Iraq is heading toward a severe economic crisis, lawmakers and economists warned on Tuesday.
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Finance committee member Mohammed al-Shabaki said key economic indicators point to rising deficits and cash shortfalls, blaming the crisis on declining crude prices, budget delays, and Iraq’s lack of financial instruments.
“Iraq lacks tools like forward contracts, foreign investments, and emergency reserves used by other countries to hedge against downturns,” he told Shafaq News, adding that existing safeguards may last no more than two years.
The 2025 budget was initially projected at $152.75 billion, with $99.3 billion allocated for spending, leaving a balance expected to roll over into the following year.
Shabaki urged urgent steps to raise non-oil revenues to at least 30% of total income—up from the current 3–4%—through robust taxation and collection measures insulated from political interference.
Economist Saleh al-Hamashi assigned direct responsibility to the Finance Ministry and Central Bank, citing their failure to circulate liquidity through the banking system. “People are hoarding cash at home due to low trust in banks, despite the rollout of electronic payments.”
He estimated Iraq’s money supply at $97 billion, with 70% held outside the banking system. “This has forced the government to rely on strategic reserves and domestic borrowing.”
Hamashi also criticized the Central Bank’s lack of a coherent monetary strategy, saying it still operates without a unified fiscal vision.
Separately, oil economist Nabil al-Marsoumi warned that Iraq’s April oil revenues barely covered public sector salaries and licensing payments. He reported a 15% drop in monthly oil income—from $7.7 billion in March to $6.7 billion in April—due to falling prices and reduced exports, a decline confirmed by the Oil Ministry.
Iraq: April oil revenues are only enough to cover salaries
Economic expert Nabil Al-Marsoumi confirmed on Tuesday that Iraq's oil revenues for last April were only sufficient to cover salaries and expenses of oil licensing companies.
Al-Marsoumi said in a post on social media that "the decline in Iraqi oil exports and the drop in crude oil prices from $72.5 in March to $66.7 per barrel last April led to a drop in oil revenues from $7.716 billion to $6.738 billion, a decrease of 15%."
The Iraqi Ministry of Oil revealed its statistics on crude oil exports and revenues for the month of April on Monday .
The ministry stated in a statement received by Shafaq News Agency that the total oil exports and revenues achieved for last April, according to the final statistics issued by the State Oil Marketing Organization (SOMO), amounted to 100 million, 953 thousand, and 282 barrels, with revenues amounting to six billion, 738 million, and 309 thousand dollars .
She pointed out that the total quantities of crude oil exported last month from oil fields in central and southern Iraq amounted to 99,752,879 barrels, while exports from the Qayyarah field in Nineveh Governorate amounted to 900,584 barrels, while the quantity of exports to Jordan amounted to 299,819 barrels.
The World Bank affirms its support for financial and environmental reform programs in Iraq.
According to a statement by the ministry, the meeting touched on World Bank projects related to environmental protection and improving resource management, especially initiatives aimed at integrating environmental considerations into financial policies and developing spending mechanisms that support adaptation to climate change.
The Minister of Finance stressed the importance of integration between financial reform and environmental policies, affirming the ministry's keenness to direct resources towards projects that enhance sustainability and support the transition to a green economy, pointing to the need for technical and financial support in this framework.
For her part, Bahrini affirmed the World Bank's commitment to supporting Iraq in building a financial system that takes into account environmental challenges, with readiness to provide technical expertise and additional financing for projects that address the impacts of climate change and support environmental development.
The meeting concluded with an agreement to intensify coordination in implementing joint environmental projects and expand partnerships to ensure better use of resources in addressing environmental and economic challenges
Kurdistan Showcases Investment Opportunities at Paris Forum
The Kurdistan Region is showcasing its investment potential at the French-Iraqi Economic Business Forum currently underway in Paris, with top officials encouraging French investors to explore opportunities in key sectors.
Mohammed Shukri, Head of the Kurdistan Region’s Investment Board, addressed a panel during the event, highlighting the Region’s supportive investment environment.
He emphasized the availability of promising opportunities in the industrial, agricultural, tourism, and energy sectors.
“Now is the time for foreign investors, particularly our French partners, to engage with the Kurdistan Region’s growing economy,” Shukri said, according to a statement released by the Investment Board.
The statement noted that several foreign investors, particularly French businesspeople, expressed readiness to visit the Kurdistan Region to explore investment opportunities firsthand and potentially boost France’s economic footprint in the area.
More than 300 foreign investors and businesspeople—mostly French—are attending the forum, underscoring France’s continued interest in Iraq’s and the Kurdistan Region’s economic landscape.
This event builds on momentum from last year’s first French-Kurdistan Economic Forum, also held in Paris.
The gathering was organized in coordination with the Kurdistan Regional Government’s Investment Board and MEDEF, France’s largest business federation, to strengthen bilateral economic ties and attract more French investment to the Region.
Iraq is approaching financial collapse, with accusations directed at the Finance Ministry and the Central Bank.
The Parliamentary Finance Committee warned that a real financial crisis is looming in Iraq in the future, amid declining oil prices and the absence of preventative and precautionary measures capable of averting an economic crisis. The committee stressed that financial and economic indicators point to a worsening deficit and declining liquidity, which portends serious challenges in the coming period. Meanwhile, economic experts hold the Ministry of Finance and the Central Bank responsible for the cash liquidity crisis.
Causes of the expected crisis
Finance Committee member MP Mohammed al-Shabaki told Shafaq News Agency, "All economic indicators confirm that the country is approaching a financial crisis, the main causes of which are the decline in oil prices and the decline in cash liquidity, in addition to the accumulating budget deficit and the government's delay in submitting budget schedules to parliament."
He explained that "Iraq lacks the financial tools used in most countries around the world to hedge against crises, such as futures contracts, foreign investments, and emergency funds," adding that "the available financial hedges are only sufficient for two years."
Al-Shabaki pointed out that "the planned budget for 2025 was approximately 200 trillion dinars, while the volume of spending is estimated at approximately 130 trillion dinars," stressing that "what remains of it is supposed to be carried over to the next year."
He also called for the need to develop urgent plans to increase non-oil revenues to 30% of the state's total revenues, compared to the current figure of 3-4%.
Al-Shabaki added, "We need to activate technical and technological tools that support the Iraqi economy, and a government that makes bold decisions in the area of tax collection and fees, independent of political and electoral influences."
Who is responsible?
For his part, economic expert Saleh Al-Hamashi blamed the Ministry of Finance and the Central Bank of Iraq for the cash liquidity crisis, pointing out that the two institutions failed to find effective mechanisms to recycle currency within the banking system, which has led citizens to hoard their money at home and lose confidence in banks despite the introduction of electronic payments.
Al-Hamashi told Shafaq News Agency, "The absence of a healthy monetary cycle in the country has forced the government to resort to domestic debt and strategic reserves." He noted that "the current circulating money supply amounts to approximately 127 trillion Iraqi dinars, 70% of which is outside the banking system and circulating among citizens, while only 30% is held by the Central Bank."
He also pointed out that "successive governments have not developed a clear strategy for managing the monetary mass," adding that "the Central Bank still lacks a comprehensive financial vision in this regard."
Al-Hamashi continued, saying, "The government has begun to sense the gravity of the situation and has begun to rely on strategic reserves or issue new banknotes when the available money supply declines."
He also pointed out that the decline in oil prices and the production cuts under OPEC agreements have directly impacted state revenues, prompting the government to attempt to achieve financial balance by drawing from its financial reserves.
In a social media post earlier today, Tuesday, economic expert Nabil Al-Marsoumi confirmed that Iraq's oil revenues for April were only sufficient to cover salaries and expenses of oil licensing companies.
Al-Marsoumi said, "The decline in Iraqi oil exports and the drop in crude oil prices from $72.5 in March to $66.7 per barrel last April led to a drop in oil revenues from $7.716 billion to $6.738 billion, a decrease of 15%."
The Iraqi Ministry of Oil revealed its crude oil export and revenue statistics for April on Monday.
The Ministry of Finance is accelerating its efforts towards the 2025 budget. Limited employment and investment are expected in light of ongoing projects.
The Iraqi Ministry of Finance is working at a rapid pace to prepare the 2025 budget schedules, amid direct instructions from the Prime Minister to expedite completion before mid-June, according to financial and economic affairs expert Haider Al-Sheikh.
In a special statement to Baghdad Today, Tuesday (May 27, 2025), Al-Sheikh explained that "the upcoming budget schedules will be limited in their operational aspect to covering basic expenses, such as the salaries of employees and retirees, the social safety net, in addition to job differences and bonuses."
He added, "As for its investment aspect, it will focus on financing ongoing projects, paying oil companies' dues, and meeting other essential obligations."
He pointed out that "initial estimates indicate that the total budget size will reach approximately 150 trillion Iraqi dinars, with a very limited deficit, as it will only cover the remainder of the current fiscal year."
Regarding revenues, Al-Sheikh revealed that "the Ministry of Finance will adopt an estimated price of $60 per barrel of oil, in line with the decline in global prices," noting that "oil revenues for last April amounted to approximately $7.7 billion."
These moves come as part of the government's efforts to maintain stable public spending and ensure the continuity of essential projects despite economic challenges and global market fluctuations.
US support for unifying Baghdad and Erbil by expanding local gas production
The US State Department expressed support on Monday for Baghdad and Erbil to work together to expand domestic gas production.
The Foreign Ministry said in statements monitored by "Mil", "We encourage Baghdad and Erbil to work together to expand domestic gas production as soon as possible."
She added, "American and Iraqi interests are best served by a strong and resilient Iraqi Kurdistan within a federal Iraq."
She added, "The United States supports American energy companies' contracts with the Kurdistan Region of Iraq."
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Washington confirms its support for gas contracts with the Kurdistan Region after the Iraqi lawsuit.
Erbil signed contracts with two American oil companies "without Baghdad's approval."
The Ministry of Oil in Baghdad declared these contracts "null and void based on the Iraqi constitution and Federal Court rulings," stressing that oil investment must proceed through the federal government.
The United States affirmed its support on Tuesday for contracts concluded by American energy companies with the autonomous Kurdistan Region of Iraq after the Iraqi government filed a lawsuit against it.
Kurdistan Regional Government Prime Minister Masrour Barzani announced the signing of two deals worth tens of billions of dollars during a visit to Washington, D.C., last Friday, where he met with US Secretary of State Marco Rubio.
During the meeting, Rubio praised the two deals with American companies, State Department spokeswoman Tammy Bruce told reporters.
"We encourage Baghdad and Erbil to work together to expand domestic gas production as quickly as possible. This type of economic partnership benefits both the American and Iraqi people and helps Iraq move toward energy independence," she said.
She added, "We also believe that American and Iraqi interests are best served by a strong and resilient Kurdistan Region within a sovereign and prosperous federal Iraq."
Of course, we look forward to continuing such deals. We expect this type of contract to flourish, and we expect and hope that it will be facilitated," she said.
The Iraqi government has filed a lawsuit against the Kurdistan Regional Government (KRG ) after Erbil signed contracts with two American oil companies without its approval, two officials told Agence France-Presse on Tuesday. This is a further indication of ongoing tensions over the exploitation of the region's oil and gas resources.
The Ministry of Oil in Baghdad declared these contracts "null and void based on the Iraqi constitution and Federal Court rulings," emphasizing that oil investment must proceed through the federal government.
The lawsuit asks the regional government to cancel contracts with HKN Energy and Western Zagros.
The agreement with Western Zagros Company concerns the exploitation of the Topkhana block, which, along with the adjacent Kurdamir block, contains up to 5 trillion standard cubic feet of natural gas and 900 million barrels of crude oil. This represents revenues estimated at approximately $70 billion "over the life of the project."
The partnership with HKN Energy concerns the Miran gas field, which is estimated to contain 8 trillion standard cubic feet of natural gas, valued at $40 billion over the long term.
Washington announces its support for US oil contracts with Erbil: They benefit all Iraqis.
US State Department Spokesperson Tammy Bruce confirmed on Tuesday that the United States supports contracts concluded by American energy companies with the Kurdistan Region.
"The United States supports economic deals that benefit all Iraqis, including the two deals announced last week," Bruce said at a conference attended by a Shafaq News correspondent in Washington.
She emphasized, "We encourage Baghdad and Erbil to work together to expand domestic gas production as soon as possible," noting that "this type of economic partnership will benefit both the American and Iraqi people and will help Iraq advance toward energy independence."
She noted that "American oil companies have invested billions of dollars in the Kurdistan Region's oil sector, and we hope to see further investments from American oil companies throughout Iraq."
The State Department spokesperson also touched on Secretary of State Marco Rubio's meeting with Kurdistan Regional Government Prime Minister Masrour Barzani in Washington last week, stating that "Rubio commended Masrour Barzani for finalizing an agreement with American companies to expand natural gas production in the region, which will help Iraq achieve energy independence."
Three informed sources and a document reported that the Iraqi Ministry of Oil has filed a lawsuit against the Kurdistan Regional Government (KRG) regarding oil and gas contracts it signed with American companies, Reuters reported on Monday.
This new legal action represents the latest obstacle to efforts to resume oil flows through the Iraq-Turkey pipeline, which has been inoperable since March 2023, despite pressure from the administration of US President Donald Trump.
Baghdad stated that direct dealings between the two companies and the Kurdistan Regional Government (KRG) without the participation of the federal government were unconstitutional and declared the two agreements "null and void."
The Kurdistan Regional Government defended the two agreements, saying they were based on existing contracts.
During his visit to Washington last week, Kurdistan Regional Government Prime Minister Masrour Barzani oversaw the signing of two energy agreements worth a total of $110 billion over their lifetime with US companies HKN Energy and Western Zagros.
A statement issued by the Kurdistan Regional Government stated that he met with US Secretary of State Marco Rubio on Friday, and they discussed "the importance of resuming Kurdistan Region oil exports through the Iraq-Turkey pipeline."
Washington praises Iraq's regional role and affirms its support for its stability.
The United States on Tuesday commended Iraq's regional role and its efforts to end tensions and crises.
The Presidency of the Republic stated, in a statement received by Al-Mada, that "President of the Republic, Abdul Latif Jamal Rashid, received today at the Baghdad Palace, the Chargé d'Affairs of the US Embassy to Iraq, Elizabeth Trudeau."
The President of the Republic affirmed "Iraq's keenness to strengthen bilateral relations in various fields, in a manner that serves the mutual interests of the two countries and peoples," pointing to "the ongoing positive developments Iraq is witnessing at various levels, and the efforts being made to consolidate security and stability and strengthen the economy and investment."
He stressed the importance of concerted efforts to ease tensions in the region, stop conflicts and wars, and affirm the principle of regional and international cooperation.
For her part, Elizabeth Trudeau expressed "the United States' aspiration to enhance bilateral cooperation on issues of common interest and support efforts to establish security and stability," praising "Iraq's regional role and its efforts to end tensions and crises."
Implementing the Joint Security Agreement on the Table for Iraq and Iran
A statement from his office, a copy of which was received by {Euphrates News}, stated that: “Al-Araji met in Moscow with the Secretary-General of the Iranian National Security Council, Ali Akbar Ahmadian, on the sidelines of the 13th International Meeting of Senior Officials Responsible for Security Issues, held in the Russian capital, Moscow.”
The statement added that “a meeting was held between the Iraqi delegation, headed by Al-Araji, and the Iranian delegation, headed by Ahmadian, during which strategic issues and files of common interest were discussed, especially the security agreement between the two countries and the stages of its implementation, as well as the security assessment file in the region and the decision of the Kurdistan Workers’ Party to dissolve itself and its effects on the two countries, in addition to following up on the joint security agreement between the two countries.”
It pointed out that “the meeting addressed the security assessment in neighboring Syria, where the Iranian side emphasized the importance of the security, stability, independence and unity of the Syrian people as a whole. The Iraqi position was also presented, which is consistent with the Iranian position in supporting the stability of Syria and its unity of its land and people.”
The Parliamentary Finance Committee explains the reasons for the decline in the dollar price: It is not due to government measures.
Member of the Parliamentary Finance Committee, Jamal Kocher, considered on Tuesday that talk about measures taken by the government that contributed to the decline in the dollar exchange rate against the Iraqi dinar is "incorrect."
"There are many reasons for this decline," Kocher told Shafaq News Agency, noting that "the most prominent of these reasons is the stagnation of trade and the decline in demand for the dollar in the parallel market."
He added, "The halting of projects and the government's failure to pay contractors, in addition to the growing tensions among the Iraqi public, have led to a significant decline in demand for dollars in the market."
The dollar exchange rate in Iraq has been gradually declining over the past few weeks, falling to less than 140,000 dinars to $100 today, according to a Shafaq News Agency correspondent.
With the escalation of economic crises in a number of countries around the world, increased customs restrictions, and a decline in global trade, these turmoils have had a profound impact on Iraqi markets, according to economic observers. Weak global demand has led to a decline in the need for the dollar for imports, directly contributing to a decline in its local price.
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