Economy Iraq risks higher budget deficit after oil sales fall short By Nadim Kawach February 11, 2025, 7:16 PM Media office of the Iraqi Prime Minister Iraq's prime minister Mohammed Al Sudani is under pressure to reduce the country's dependence on oil revenues 2024 forecast was $40bn deficit Could be $8bn higher Reliance on oil criticised Iraq’s budget deficit could be higher than forecast after the Opec member reported $92 billion in oil exports — less than expected — for the first 11 months of last of year. In June its parliament approved 2024 spending of around $163 billion, with revenue forecast at nearly $123 billion. This left a budget deficit of $40 billion. Oil accounts for close to 90 percent of government revenue. “The deficit in 2024 was expected to be large because spending was high,” Nabil Al-Marsoumi, an economics professor at Iraq’s Basra University, told local media. “There is a possibility that the government has overshot budgeted expenditure.” Figures by the Iraqi finance ministry published in the local press showed non-oil revenue for the 11 months was about $12.5 billion, taking total revenue for the period to nearly $104.5 billion. Assuming another $10 billion in revenue in December, the total for the year would be about around $114.6 billion, below budget [for a total budget deficit of $48.4 billion], the papers said. Iraq’s external debt halves as projects start to pay off Iraq to stop taking Iranian gas by 2028 BP to invest up to $25bn to redevelop Iraqi oilfields In mid-2023 Iraq endorsed a landmark three-year budget with average spending of $135 billion for 2023-2025, and a 2023 deficit of $49 billion. But parliament has since authorised the finance ministry to revise budget estimates through the year, based on oil prices and spending needs. In 2023 the budget was based on an average oil price of $70 a barrel and production of 3.5 million barrels per day (bpd). This included nearly 400,000 bpd from Kurdistan. Iraq’s government has repeatedly come under fire over the country’s reliance on volatile oil sales. It has been urged to copy other Gulf states in diversifying its sources of income. In press comments this week, Iraqi economist Mohammed Al-Hasani warned that “this heavy dependence exposes Iraq to macroeconomic fluctuations, as the country’s fortunes remain closely tied to volatile global oil prices.” He said shifting from an oil-reliant economy to a diversified model would require substantial political will, as well as improvements in security and political stability. Prime ministerial financial advisor Mudhhir Mohammed Saleh, quoted by Shafaq News agency, said: “Continued reliance on oil as the primary source of revenue also forces the country to rely on external or internal borrowing to cover budget deficits.” “This highlights a critical need for more effective management of state funds and the exploration of alternative financing solutions.”
