Employee salaries... caught between a rock and a hard place!
Written by Younis Al-Kaabi ||
The issue of employee salaries in countries that are heavily dependent on oil (such as Iraq and the Gulf states) is one of the most sensitive issues when crude oil prices decline. When revenues fall, governments face a funding gap that forces them to take proactive or remedial measures.
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The following are the most prominent methods used globally and economically to address this issue:
1- Immediate Measures (Liquidity Solutions):
- Domestic Borrowing: Turning to the central bank or local banks to cover the temporary salary shortfall. This is a quick solution, but it may increase inflation if it continues for an extended period.
– Using Reserves: Withdrawing from sovereign wealth funds or foreign currency reserves to ensure the uninterrupted payment of salaries.
– Postponing Non-Essential Spending: Halting new investment projects and postponing non-urgent government purchases to direct available liquidity towards the operating budget (salaries).
2- Structural Reforms (Expenditure Reduction):
- Cleansing up the civil service: Identifying and eliminating ghost employees and those receiving double salaries, thus saving the budget significant sums.
– Rationalizing allowances: Instead of cutting basic salaries, some governments are reducing administrative allowances, hospitality allowances, and travel allowances for senior officials.
– Freezing new appointments: Temporarily freezing public sector recruitment and relying on retirements to gradually reduce the number of employees.
3- Sustainable Economic Solutions:
– Diversifying Revenue Sources: Enhancing tax collection, customs duties, and other revenue streams to reduce dependence on oil (which sometimes constitutes more than 90% of income).
– Supporting the Private Sector: Encouraging employees and recent graduates to join the private sector by offering affordable loans and retirement guarantees, thus alleviating pressure on government jobs.
– Hedge Funds: Establishing financial stabilization funds that pool surpluses when oil prices are high, to be used exclusively when prices are low.
4- Difficult Scenarios (Last Resort):
In cases of a major collapse in oil prices, countries may be forced to resort to more drastic measures such as:
– Changing the exchange rate: to reduce the real value of salaries in dollars and provide greater liquidity in the local currency (as happened in Iraq in 2022).
– Mandatory savings: deducting a percentage from high salaries and freezing it as a debt owed to the employee by the state, to be repaid later when prices improve.
How were salaries secured in Iraq in 2025 amidst the current fluctuations?
In Iraq, the issue of salaries represents the biggest challenge for the government due to the almost complete dependence (more than 90%) on oil revenues, and with the end of 2025 approaching, pressures have increased as a result of global market fluctuations.
Employee salaries in Iraq are currently managed through the following mechanisms:
1- Securing Salaries in the 2025 Budget:
– The Three-Year Budget: Iraq benefited from the adoption of a three-year budget (2023, 2024, 2025), which provided legal cover for spending. The government set an estimated price for a barrel of oil in the budget (around $70), and any drop below this price means an increase in the “planned deficit.”
– Top Priority: The Ministry of Finance considers salaries a “governing expenditure,” meaning that spending on investment projects and infrastructure development is immediately halted in the event of a liquidity shortage, to ensure that salaries are paid on time.
2- Tools used by the government to address the deficit:
If oil prices fall sharply, the state follows these paths:
– Domestic borrowing: The government relies on withdrawing liquidity from major state-owned banks (Rafidain and Rasheed) and from the Central Bank of Iraq through “rediscounting bonds.”
– Maximizing non-oil revenues: There is currently significant pressure to activate electronic tax collection, collect taxes from telecommunications companies, and control border crossings to compensate for the oil shortfall.
– Utilizing previous surpluses: Benefiting from the financial surpluses generated by ministries during the oil boom years, which are held in the Central Bank’s accounts.
3- Existing Challenges (Beyond Salaries):
Despite improved salaries, the continued decline in oil prices is causing other problems:
– Stalled Development: Salaries are being paid, but new hospitals, schools, and roads are being halted because the money is going towards consumption.
– Increased Money Supply: The significant expansion in public sector hiring in recent years has pushed the payroll to record levels (exceeding 60 trillion dinars annually), making any fluctuation in oil prices a real threat.
4- Future Directions (Required Reforms):
– Automation and Salary Localization: The localization process has successfully uncovered thousands of fictitious names, and work is underway to cross-reference data to eliminate double salaries.
– Activating the Private Sector: There are attempts to enact laws that guarantee the rights of workers in the private sector (such as the Social Security Law) to encourage young people to leave the government employment queue.
The impact of the current dollar exchange rate in Iraq on the purchasing power of salaries, and tips for Iraqi employees on how to manage their personal budgets under these circumstances:
In Iraq today, specifically at the end of 2025, the difference between the official and parallel market exchange rates for the dollar puts direct pressure on employees' finances. While employees receive their salaries in dinars, most of the goods they purchase (food, electronics, clothing) are priced based on their import costs in dollars.
Below is a detailed analysis of the financial situation and how employees can manage their personal budgets:
1- The Impact of the Exchange Rate on Employee Salaries (2025):
- Stable Salary and Changing Costs: The official exchange rate is stable at 1320 dinars, but in the local market (exchange), the rate fluctuates around 143,000 dinars per 100 US dollars. This difference means that the purchasing power of an employee's salary is eroded by 10% to 15% compared to the situation before the price fluctuations.
– Inflation: Even with occasional exchange rate stability, merchants tend to raise prices in anticipation of any drop in oil prices, which means the dinar can buy fewer goods than it could a year ago.
2- Tips for employees to manage their budget under these circumstances:
To cope with this situation, financial experts in Iraq advise following the “Financial Defense” strategy:
A- The modified (50-30-20) rule:
Try dividing your salary as soon as you receive it as follows:
- 50% for basic needs: (rent, generator, dry goods, bills).
- 30% for variable expenses: (transportation, communications, daily expenses).
- 20% for savings or debt repayment: This portion is a safety net in case of delayed salaries or sudden price increases.
B- Smart Savings:
- Strategic Stockpiling: Upon receiving your salary, buy dry goods (rice, oil, sugar, cleaning supplies) that will last two or three months. These items are among the first to see price increases when the dollar rises.
- Look for local alternatives: Some Iraqi national industries (food and construction) are beginning to recover, and their products are often cheaper than imported goods affected by the dollar.
C- Debt and Credit:
- Avoid unnecessary loans: During times of fluctuating oil prices, avoid taking out high-interest loans to buy luxuries (such as a newer car or mobile phone).
- Pay off small debts: Start by getting rid of small debts (shop owner debt, business advance) to reduce monthly obligations.
D- Simple Investment:
- If you have a small surplus, consider “freezing” it either in gold (to preserve its value) or in a savings account, and avoid keeping large amounts of cash in dinars for very long periods if you are afraid of its value decreasing.
3- A message of economic reassurance:
Despite concerns about the decline in oil prices, the Central Bank of Iraq currently has good reserves of gold and hard currency (exceeding 100 trillion dinars as exported currency), and this gives the state the ability to maneuver to secure salaries for a long period even if oil falls below $70.
A new shift in customs procedures is expected at the beginning of next year.
The Director General of the Authority, Thamer Qasim Dawood, explained in a press statement that "the Authority has begun the gradual implementation of the system, as the first phase included five basic materials: gold, mobile phones, jewelry, curtains, in addition to some other goods such as cooling devices and cars."
He pointed out that "the period from the first until (31) of this month represents a trial phase in preparation for generalizing the system to all goods and merchandise in the federal customs centers, stressing that the Kurdistan Region of Iraq ports are temporarily excluded because they are not linked to the ASYCUDA system adopted by the Authority."
Daoud stressed that “the electronic link between customs declarations and the Central Bank of Iraq will directly contribute to reducing currency smuggling and money transfers without corresponding goods.”
Iraqi state-owned banks suspend operations until the beginning of next year
Iraqi state-owned banks will begin their annual inventory and audit procedures this week, which will halt their operations until the beginning of next year.
An informed source told Shafaq News Agency that "this step comes to pave the way for settling accounting holds and preparing the statistics and financial data for the past year," noting that "the work will include not promoting banking service requests and temporarily halting all banking activities during the inventory period, and this procedure is carried out annually."
The source confirmed that "banks will resume their normal operations and begin promoting banking transactions and services at the beginning of next year after completing the inventory and auditing procedures in accordance with the approved regulations."
Masrour Barzani and Sisi agree on the need to continue efforts to maintain security and stability in Iraq and the region.
On Sunday, Kurdistan Region President Masrour Barzani and Egyptian President Abdel Fattah al-Sisi stressed the need to continue efforts to consolidate security and stability in Iraq and the entire region.
This came during a meeting between the two sides at the Presidential Palace in Cairo, according to a statement issued by the regional government.
During the meeting, the Egyptian President affirmed his country’s full readiness to strengthen bilateral relations and elevate them to broader horizons.
For his part, the Prime Minister of the Kurdistan Region of Iraq praised Egypt’s role, under the leadership of President Sisi, in consolidating the foundations of security and stability in the region, appreciating Egypt’s positions in support of peaceful coexistence.
The meeting also witnessed a mutual emphasis on the importance of strengthening ties between the Kurdistan Region and Egypt in various fields, particularly in the investment and trade sectors, in order to serve common interests.
Both sides also agreed on the need to continue coordination and joint cooperation and to intensify efforts aimed at preserving security and stability in the Kurdistan Region, Iraq and the region in general.
The Governor of the Central Bank of Iraq told Al-Borsa newspaper: Egyptian banks are considering establishing joint ventures in the Iraqi market.
Increasing the pace of investments between the two countries requires a joint banking system.
Ali Al-Alaq, the governor of the Central Bank of Iraq, revealed that a number of Egyptian banks are currently considering entering into strategic partnerships with Iraqi banks to establish joint banks operating in the Iraqi market, in a move aimed at strengthening banking cooperation between Cairo and Baghdad, to meet the requirements of increased investments and trade exchange between the two countries.
Al-Alaq added to Al-Borsa on the sidelines of the Al-Baraka Islamic Forum held in Cairo that the Central Bank of Iraq is working to facilitate all regulatory and procedural obstacles for Egyptian banking sector institutions wishing to expand within Iraq, which will contribute to accelerating the flow of financing and facilitating trade and investment.
He noted that there is close coordination with the Egyptian authorities, expressing his hope that the Central Bank of Egypt will approve the request to reopen the “Rafidain Bank” branch in Egypt, after it had been closed for many years, as this would have a positive impact on supporting financial and banking relations between the two countries.
Rafidain Bank, which was established in 1941 and is one of the oldest and largest Iraqi government banks, has a network of branches inside and outside Iraq, including a branch that operated in Cairo before its operations were halted due to regulatory and legal considerations imposed by the rules for practicing foreign banking in Egypt and following the withdrawal of the license according to the requirements of the Central Bank of Egypt.
The Egyptian branch of the bank had previously dealt with a number of financial transactions, but these were stopped, which opened the door to repeated discussions between the two sides with the aim of restarting the branch, in light of the need to facilitate financial transactions between Egyptian and Iraqi investors and the Iraqi community residing in Egypt.
The Governor of the Central Bank of Iraq stressed that mutual banking partnerships can represent a direct financial bridge to support the volume of trade and investment flows, by providing trade finance services, credit facilities, and clearing services between companies in the two countries.
He explained that Iraq will work to create a regulatory environment to receive Egyptian banks, while ensuring the removal of operational obstacles, in line with Iraq’s directions to enhance its role as a regional center for trade and financial exchange, and to create a suitable climate to attract Egyptian capital in the industrial, service and agricultural sectors.
On the Egyptian side, the entry of Egyptian banks into Iraq through local partnerships could open up prospects for financing joint projects and facilitating exports and imports between the two countries, especially in the energy, food, and logistics sectors, thus strengthening bilateral economic relations at a stage that is considered one of the most dynamic between Cairo and Baghdad.
Savaya travels to Baghdad to discuss the nature of the relationship between Washington and Baghdad in the next phase.
An informed government source revealed on Sunday that the US President’s envoy, Mark Savaya, will soon visit Baghdad at the head of a delegation from the US administration to discuss a number of issues related to the nature of the relationship between Washington and Baghdad in the next stage, as well as to discuss solutions to the crises.
The source told Shafaq News Agency that “US envoy Mark Savaya, accompanied by a number of US officials, will visit Baghdad soon to meet with a number of officials in the Iraqi government and various political leaders, to discuss important issues concerning developments in the Middle East and its stability, in addition to economic dealings and partnerships, US investment, and the priorities of the stage, most notably the political and security files for Iraq and the region in general.”
He added that "the delegation will also discuss mechanisms to expand the scope of partnership and political consensus regarding some visions concerning the regional situation, and proposals for solutions to address crises and challenges," indicating that "Safaya will carry with him American messages to the Iraqi forces, including the results of work on some issues and files agreed upon between Baghdad and Washington, and the upcoming visions for formulating a real partnership, specifically regarding the withdrawal of American forces according to the specified timetables, in addition to how to deal with the next stage based on the security partnership and arming the Iraqi forces, and the armament plans."
Last October, US President Donald Trump decided to appoint Mark Savaya as special envoy to Iraq .
Mark Savaya is the third US envoy to Iraq since Paul Bremer in 2003, and after Brett McGurk, during the war against ISIS in 2014.
Savaya has stirred controversy through his recent writings, in which he explicitly called for an end to the armed factions and for them to be prevented from participating in the government, as well as issuing warnings to Iraq and cautioning against a return to a "cycle of complications".
Yesterday, Saturday, some armed factions announced their agreement to the call to restrict weapons to the state, and official positions were issued by the Secretary-General of the Imam Ali Brigades, Shibl al-Zaidi, followed by a call from the Secretary-General of the Asa’ib Ahl al-Haq Movement, Qais al-Khazali, as well as the Ansar Allah al-Awfiya faction, in addition to the spokesman for the Sayyid al-Shuhada Brigades.
The head of Iraq’s Supreme Judicial Council, Faiq Zaidan, announced yesterday that armed factions had responded to the call to restrict weapons to the state.
However, Kataib Hezbollah issued a statement rejecting its "disarmament" and affirming that "sovereignty, controlling the security of Iraq, and preventing foreign interference in all its forms are prerequisites for discussing the state's monopoly on weapons. We affirm that our position is consistent with what our religious authorities have stated, whenever that is achieved."
An unlikely growth market: EL&N’s Iraq debut shows the troubled nation is turning a corner
Famed for its floral interiors, specialty coffee and high-end pastries, the UK’s EL&N sees potential in the Iraqi market – and it’s not alone
To many in the West, Iraq is synonymous with conflict and instability. However, a recent influx of premium and boutique hospitality brands shows that the country is turning a corner on its recent troubled history – and becoming an unlikely growth market for branded coffee chains.
UK-based specialty coffee group EL&N is the latest premium hospitality operator to launch in Iraq, opening a boutique outlet at the upscale Erbil Avenue shopping centre and mixed-use development in Erbil, the capital and most populous city in the Kurdistan region.
There's more but they want you to subscribe so that's the free portion of the article.
An Iraqi company obtains a license to supply aircraft with fuel at all airports.
The Oil Products Distribution Company announced on Sunday that it has obtained a license to supply aircraft fuel at all Iraqi airports, as part of its efforts to expand its operations and achieve the highest levels of economic benefit for the distribution sector .
The company’s general manager, Hussein Talib, said in a statement received by Al-Sa’a Network: “This step comes in line with the government and the Ministry of Oil’s directions to maximize and diversify revenues in a way that achieves the highest economic benefits for the company and the distribution sector.”
He explained that "obtaining the license was made possible through the support provided by the Deputy Prime Minister for Energy Affairs and Minister of Oil, Hayyan Abdul Ghani Al-Sawad, and the Undersecretary of the Ministry of Oil for Distribution Affairs, Ali Ma'arij Al-Bahadli, in addition to the efforts of the company's staff, especially the Supply Authority and the Legal Authority ."
Talib explained that "the license includes all Iraqi airports," stressing that "there are ambitious plans to expand the activity in the future in a way that serves the public interest and the air transport sector, which is an important and vital sector
Iraq and Iran discuss activating the international transport system “TIR” (Transit)
A high-level Iraqi delegation discussed on Sunday with the Iranian side the mechanisms for activating the International Transport of Goods and Trucks (TIR) agreement, during a joint meeting chaired by the Prime Minister’s Advisor for Transport, Customs and Border Ports Affairs, with the participation of the General Company for Land Transport.
A statement from the General Company for Land Transport indicated that “the meeting was attended by the Director General of the Technical Department at the Ministry of Transport, Karim Al-Jabri, the Head of the Customs Authority, and a number of specialists, where ways to implement the (TIR) system were discussed, which is a qualitative leap to simplify customs procedures and facilitate the movement of goods across international borders with the least amount of delay.”
The statement added that “the meeting’s agenda focused on strategic axes, most notably simplifying procedures through flexible mechanisms to expedite customs inspection and auditing, as well as developing cooperation at border crossings to enhance the efficiency of trade exchange between the two countries.”
The company’s general manager pointed out that “activating the agreement will contribute to supporting the Iraqi land transport fleet, enhance the smooth flow of trucks and reduce operating costs, which will positively impact the national economy and Iraq’s position as a regional trade link.”
The statement continued, “At the conclusion of the meeting, both sides agreed to continue joint coordination and form working groups to follow up on the implementation of the understandings, in order to ensure that the agreement enters into force and serves the common interests of Iraq and Iran.”
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Free zones in Iraq
A question that is frequently asked in economic circles is, "Why were no new free zones established in Iraq after 2003, and why was no new law for free zones enacted that is consistent with the nature of the transformation in the economic system towards a market economy?"
The answer usually comes to attribute the reasons to the state of instability and lack of political consensus that the country witnessed after 2003, while some see the absence of legislation that regulates the flexible management of an attractive investment environment as a pivotal reason for this disruption, in addition to what is said about the damage that may befall existing local industries when new free zones are established.
Contrary to these views, previous governments sought to take such practical steps, but they faltered for reasons related to the overall landscape in which external and internal wills were intertwined. The free zones established in the 1990s in Basra, Mosul, and Anbar remained without development that reached the minimum levels of local consumption. The Free Zones Law No. 3 of 1998, issued under a besieged economic system, remained in effect, failing to keep pace with global developments that had occurred during the past three decades, making the legal framework less attractive to international investors.
Today, after the clear stability in all aspects of life, and what is being said about the need to move away from rentierism towards a diversified economy, it is necessary to pay attention to this important economic sector, which can generate revenues that exceed oil revenues if a new law is enacted, or the current law is amended, in a way that achieves the flexibility that attracts investments within a geographical scope that ensures fair competition with the local product, and gives investors the freedom to work in a way that contributes to creating real development and serious treatment in the labor market.
Global experiences in creating free zones have not limited their objectives to expanding and facilitating trade through preferential economic policies. Rather, these zones have become laboratories for institutional reforms and simplifying government procedures, as well as being adopted in testing governance models that have become a key focus in opening up to other sectors that are attractive to technology and knowledge. They have expanded to include inland areas and are not limited to border areas in many countries, even those that still rely on the state economy system.
The fear that the expansion of free zones will lead to flooding the market and harming the local product is nothing but a concern that is not consistent with the mechanism of the market economy, since aggregate demand is what determines prices according to market relations based on laws that regulate competition and prevent monopoly, in addition to the importance of having a law for free zones that unifies the regulatory bodies within a single free zone, and is consistent with the mechanism of controlling resources and taxes as in global experiences.
The Iraqi economy in 2025: Pivotal transformations between ambition and challenges
In 2025, Iraq witnessed a crucial turning point in its economic trajectory, as growth factors and challenges intertwined in a complex equation that defined the features of the near future. While the country achieved tangible accomplishments in vital sectors such as oil, electricity, and infrastructure, it continued to face deep structural challenges related to near-total dependence on oil, exchange market fluctuations, and a growing financial deficit.
While the International Monetary Fund predicted economic growth of 5.3%, the highest rate in years, this growth was mainly driven by the oil sector, while the non-oil sector continued to suffer from weak growth and development.
The year also witnessed widespread controversy surrounding the 2025 budget, whose schedules were delayed, and the financial deficit expanded to alarming levels, raising questions about the state’s financial sustainability.
Official price and parallel market
The Central Bank of Iraq maintained a fixed official exchange rate of 1,305 dinars per dollar for most of 2025, in a strategic move aimed at controlling the market and preventing the unpredictable fluctuations witnessed in previous years. However, the parallel market witnessed significant fluctuations, with the dollar price ranging between 1,397 and 1,424 dinars at different times of the year, reflecting a continuous gap between the official and parallel rates ranging between 7% and 9%.
Despite these challenges, the Central Bank recorded important positive indicators in 2025, as the cash reserve rose to $108 billion, a record level that provides a safety cushion for the economy, and the gold reserve rose from 130 to 172 tons, indicating the diversification of reserves and strengthening confidence in the national currency.
Regarding inflation, the inflation rate fell to 2.2% in the first quarter of 2025, a relatively low rate reflecting the success of monetary policy in controlling prices. Private sector credit also grew by 1.1%, indicating an improved financial environment and increased confidence in the banking system.
Growth forecasts are optimistic
The International Monetary Fund (IMF) projects that the Iraqi economy will grow by 5.3% in 2025, compared to 1.4% in 2024, indicating a significant acceleration in economic activity. This growth is primarily driven by the recovery of the oil sector and increased government investment in infrastructure and services.
In a more optimistic forecast, the World Bank indicated that Iraq could achieve the highest growth rate among Arab economies, at around 6.7%, if oil prices rise to approximately $80 per barrel. However, economic experts cautioned that this scenario remains contingent on external factors beyond Iraq's control.
Non-oil sector: Slow growth
Despite optimism about overall growth, the non-oil sector recorded modest growth of 5% in 2024, with expectations of continued growth of 4% in 2025.
This growth, while positive, still falls short of expectations and reflects the structural challenges facing productive sectors such as agriculture, industry and tourism.
The IMF report indicated that non-oil growth may not exceed 1% in some estimates, reflecting the large structural dependence on oil and the urgent need to diversify sources of economic growth.
The 2025 budget: controversy and complications
The 2025 budget witnessed widespread controversy and significant delays in approving its schedules, even though it falls within the three-year budget for the years 2023-2025, which was approved in June 2023. The Prime Minister's advisor, Mazhar Muhammad Salih, estimated that the size of the 2025 budget is about 200 trillion dinars (about 150 billion dollars), with a projected deficit of about 64 trillion dinars.
According to estimates, operating expenses constitute approximately 67% to 70% of total public expenditures, comprising salaries, allowances, pensions, and social welfare. This budget structure reflects the rentier nature of the Iraqi economy, where the majority of spending goes toward salaries and current services, while investments in infrastructure and development projects remain limited.
Approval delay crisis
2025 witnessed a major crisis due to the failure to approve the budget schedules, which affected provincial allocations, investment projects, and the salaries of some groups. Parliamentarians accused the government of stalling, while observers indicated that the delay stemmed from disagreements over revenue distribution between Baghdad and the Kurdistan Region, as well as issues related to the costs of producing and transporting the region's oil.
Experts warned that delaying the approval of the 2025 budget would have a direct impact on the Iraqi market, investment activity and public spending, and would increase uncertainty that harms the business environment and economic confidence.
The growing deficit and debt
The International Monetary Fund (IMF) projects that Iraq's budget deficit will widen to 7.6% of GDP in 2024, compared to 1.3% in 2023, raising concerns about fiscal sustainability.
The Prime Minister revealed that Iraq's total external debt exceeds $10 billion, while its domestic debt amounts to approximately 34 trillion dinars.
Al-Sudani confirmed that the new government will have to borrow due to the deficit, but stressed that the financial situation is stable thanks to large reserves.
He also announced that the number of employees in Iraq during 2025 was 4.5 million, and the number of retirees was 2.9 million, while social protection allocations amounted to 6 trillion dinars annually.
Oil production: commitments and ambitions
Iraq's crude oil production remained stable at around 4 million barrels per day for most of 2025, as Baghdad adhered to the OPEC+ voluntary production cuts. Iraq produced approximately 965 million barrels during the first eight months of 2025, generating revenues of around 73 trillion dinars, representing 90% of the country's total revenue and underscoring its near-total dependence on oil.
Iraq pledged to compensate for its overproduction of 1.44 million barrels per day in 2024, exceeding its quota, with full compensation to be completed by September 2025. This commitment aligns with the OPEC+ production cuts and aims to maintain global price stability.
Ambitious future plans are in place .
In the longer term, the Ministry of Petroleum announced ambitious plans to increase production to more than 6 million barrels per day by 2029, as part of a strategy to maximize revenues and boost production capacity. This ambition requires massive investments in infrastructure, addressing associated gas issues, developing existing fields, and exploring new ones.
Pricing and revenue challenges
The IMF estimates that oil revenues are set to decline from $99.2 billion in 2024 to $84.2 billion in 2025, affected by lower prices that have fallen from an average of $80.6 per barrel to $65.9.
Investments: Huge figures and persistent obstacles
Arab and foreign investments in Iraq have exceeded $100 billion over the past two years, distributed among the housing, industry, energy, agriculture and infrastructure sectors.
These large figures reflect the government's efforts to improve the investment environment and attract capital, and also reflect growing confidence in the country's stability and economic opportunities.
The National Investment Commission indicated that Iraq ranked fourth among the best emerging markets in 2024, a positive indicator of the improved business climate and attractiveness of the investment environment.
Investment and Opportunity Forums
The government, through the Prime Minister, announced a huge package of investment opportunities worth $450 billion, coinciding with the Iraq Investment Forum.
The Prime Minister’s advisor stressed that these steps are not just an announcement, but a roadmap for comprehensive transformation within “Iraq Vision 2050”.
This vision aims to double the gross domestic product, reduce unemployment to less than 10%, achieve 60% economic independence, and take advantage of the demographic dividend, as the population is expected to be under 30 years of age by about 60% by 2050.
Fitch rating: Cautious international confidence
At the international level, Iraq maintained its credit rating from Fitch Ratings at (B) with a stable outlook throughout 2025, indicating the country's ability to meet its short- and medium-term financial obligations, despite ongoing challenges related to the structure of its economy and its dependence on oil.
According to experts, maintaining this rating is a factor that supports investor confidence and reflects an improvement in debt management and liquidity compared to previous years.
Real challenges
Despite the large numbers, economic experts pointed out that real foreign investment is still absent from non-oil sectors, stressing that many investments classified as foreign are in fact Iraqi through companies registered abroad.
Bureaucratic, legal, and security challenges remain major obstacles to the flow of real capital. Furthermore, weak infrastructure, complex government procedures, and a lack of transparency in some areas all limit the attractiveness of the investment environment and delay the transformation of opportunities into productive projects on the ground.
Achievements of the Sudanese government: a record of service and an electoral victory
Prime Minister Mohammed Shia Al-Sudani revealed the completion of 511 service projects, including infrastructure, roads, bridges, schools and health centers.
He also announced the resolution of the one million job gap problem and a reduction in unemployment to 2.1% during his government term, which began in October 2022.
The government implemented 43 development projects and 97 new school buildings, and provided services to areas inhabited by more than 3 million citizens. This large service record boosted the government's popularity and paved the way for subsequent electoral victory.
Banking sector and financial reforms
The Iraqi banking sector witnessed significant reform steps in 2025, as the Central Bank worked to enhance compliance with international standards and improve financial transparency.
The government launched initiatives to develop digital banking infrastructure, encourage electronic payments, and reduce reliance on cash.
Credit to the private sector also grew by 1.1%, a positive indicator of increased confidence in the banking system.
The central bank continued its efforts to reduce the number of banks that violate international standards, and merged some small banks to enhance financial stability.
Banking challenges
Despite the improvements, significant challenges remain, including US restrictions on some Iraqi banks, weak public confidence in the banking sector, and continued heavy reliance on cash transactions.
The spread of banking culture among citizens remains limited, which limits the sector’s ability to contribute to economic development.
Environmental challenges: The water crisis and drought... the most serious crisis
The decline in water levels of the Tigris and Euphrates rivers has led to a reduction in cultivated areas and a decrease in grain production in many governorates, especially in the central and southern regions.
International reports have warned that water shortages could lead to a deficit in staple crops and a higher food import bill, putting additional pressure on foreign exchange reserves and the budget.
The drought also led to the displacement of some residents from rural areas to cities, increasing the pressure on urban services.
Imports and the trade balance
Iraq remains heavily reliant on imports to meet its needs for consumer goods and basic commodities, with its import bill reaching high levels. Reports indicate a significant non-oil trade deficit, reflecting the weakness and uncompetitiveness of domestic production sectors.
Regional and international challenges
The Iraqi economy has been affected by regional developments, particularly tensions in the region and the situations in Syria, Lebanon, and Yemen. Complex relations with Iran and US pressure have also impacted Iraq's economic freedom of movement.
US sanctions
The impact of US sanctions on some Iraqi banks continued, complicating financial transfers and foreign trade, and the cancellation of the exemption to purchase energy from Iran posed a major challenge to the electricity sector.
Regional comparison: Iraq's position among Arab economies
According to the World Bank’s projections, Iraq leads the Arab region in expected growth rates for 2025 at 6.7% in the positive scenario. This puts Iraq in an advanced position among regional economies, surpassing countries such as Egypt (3%), Djibouti (5.2%), and Lebanon (4.7%).
Common challenges
Despite the superiority in expected growth rates, Iraq shares common challenges with the countries of the region, including dependence on a single source of income (oil or remittances), weak productive sectors, the need for structural reforms, and climate challenges.
The Iraqi economy faces three main scenarios for the near future:
Positive scenario: If oil prices remain at high levels (above $75), the government succeeds in implementing the planned reforms, and foreign investment flows in heavily, the economy could achieve sustainable growth exceeding 6% annually, with a tangible improvement in services and a decrease in unemployment.
Medium scenario: Continuation of the current situation with modest growth (4-5%), continued dependence on oil, slow progress in reforms, and ongoing challenges in attracting real investment.
The negative scenario: A sharp drop in oil prices (below $60), or worsening climate and water crises, or escalating regional tensions, could push the economy into recession and worsen the fiscal deficit.
Comprehensive summary: A pivotal year between ambition and reality
The year 2025 represents a turning point in the modern economic history of Iraq. On the one hand, the country achieved tangible accomplishments, including higher growth rates, increased foreign currency reserves, improved infrastructure, and the implementation of hundreds of service projects. On the other hand, the Sudanese government succeeded in achieving an electoral victory that reflects relative public satisfaction with government performance.
On the other hand, the structural challenges remained deep and serious. The near-total dependence on oil (90% of revenues) makes the economy vulnerable to global price fluctuations. The growing fiscal deficit (7.6% of GDP) raises concerns about fiscal sustainability, the water crisis and drought threaten food security and social stability, and the gap between the official and parallel exchange rates for the dollar reflects imbalances in the currency market.
The year 2025 proved that Iraq has the potential and resources to become a regional economic power, but achieving this ambition requires genuine political will, radical reforms, good governance, and a long-term strategic vision that goes beyond immediate gains and places the interests of future generations at the heart of national priorities.
Class ring lost for decades returned to Iraq War victim’s family
Metal detector discovery at Perdido Pass brings comfort to local family 21 years after son’s death
A class ring missing for decades has been returned to the family of Brett Hunter, an Irvington resident killed in Iraq 21 years ago.
The ring was discovered by a mother and son using a metal detector at Perdido Pass and returned to Hunter’s family through a Facebook post, bringing unexpected and timely comfort.
Hunter, a water plant specialist working for KBR, a contractor for the U.S. Army, was killed Dec. 21, 2004, when a suicide bomber struck the mess tent at a U.S. base in Mosul, Iraq.
Hunter’s family and friends gathered at the Original Oyster House Sunday afternoon to celebrate what his mother, Sharon Hunter, calls his “heavenly anniversary” and to share the story of the ring’s return.
“It brought us a piece of Brett back,” Sharon Hunter said. “The goodness of God came and gave us joy because of a lost ring.”
Brett’s sister-in-law, Hollie Hunter, said she was in contact with the woman who found it and was told there was an inscription on the ring. The woman asked her to confirm whether it belonged to Brett, and they realized it was his when Hollie mentioned one of his favorite sports.
“She said ‘This is your ring. It has golf on the side’,” Hollie Hunter said.
His father, Larry Hunter, remembered Brett’s passion for golf.
“People would actually come to see how far he could hit a golf ball, but he was a good golfer. He was a competitor and smiled all the time,” Larry Hunter said.
Sharon Hunter said the woman who helped find the ring was once a student of Brett’s brother, Bryan Hunter.
“I taught her, I’d say one or two years and just an amazing young lady,” Bryan Hunter said.
The ring was found at Perdido Pass, a place his family said Brett loved to fish.
“We got so many fishing stories because he was either fishing or golfing,” Bryan Hunter said.
Although it’s unclear exactly when or how he lost the ring, his family said it’s a miracle to have it back.
“That was just a miracle being found down at Perdido Pass 21 years ago after he has died,” Sharon said.
His family described Brett as someone who loved fiercely, valued his friendships and left a hole that’s still felt 21 years later.
“The thing I remember the most was how he loved people.”
“He loved his friends, he loved his family, and he would do anything for any of us,” Sharon said.
“He was like my big brother and I’m so grateful. I miss him terribly but I’m so touched that this ring was found and it means so much, where it was found and everything,” another woman said.
LINK to the CNBC ARABIA from December 16th
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