Finance

Iraq targets 20% non-oil revenue to close fiscal gap

January 8, 2025, 2:49 PM

Workers building a secondary school in Baghdad. Construction is one of the sectors driving an increase in Iraq's non-oil revenues

Was 12% of total in 2024
Customs earnings have doubled
$49bn budget deficit in 2023

Iraq has set a target to raise non-oil revenues to 20 percent of national income to tackle the country’s persistent budget deficit, a senior official has said.

Non-oil revenues – which include tax and customs as well as earnings outside the hydrocarbon sector – rose to nearly 12 percent in the first nine months of 2024, according to Mudhar Saleh, a financial adviser to Mohammed Al Sudani, Iraq’s prime minister.

The non-oil figure stood at about 7 percent before Iraq approved a landmark three-year budget in 2023.

Saleh told the state news agency on Monday that Baghdad was working within “a long-term plan to increase non-oil earnings from various sectors to support the budget”.

“Iraq’s non-oil income has recorded a steady rise over the past few years,” he said. “This has encouraged the government to set a target of 20 percent of the total budgeted revenue at the end of its 2023-26 budget.”

Saleh said the increase was down to import customs and expanded taxes, as well as the housing, transport, construction and other sectors.

Figures from Al Mustaqbal Centre for Economic Studies and Consulting, an Iraqi think tank, showed total non-oil revenues jumped from about 4.7 trillion dinars ($3.58 billion) in 2023 to nearly 14 trillion dinars in 2024.

It attributed the increase to higher taxes and customs tariffs, adding that oil income recorded its lowest level in 2024 at 88 percent of the total.

“The development of non-oil revenues in the budget was a result of high discipline in tax and customs collection following the introduction of advanced digital operations and tax expansion as part of reforms announced by the government,” Saleh said.

In separate comments, Atwan Al Atwani, the head of the Iraqi parliament’s finance committee, said the government was striving to “achieve fiscal and economic stability in the medium and long term and to expand the contribution of the non-oil sector to GDP”.

Figures from the General Customs Authority showed customs earnings more than doubled to 1.9 trillion dinars in 2024, from 900 billion dinars in 2023.

Iraq, which is Opec’s second largest oil producer after Saudi Arabia, has not yet released its detailed 2025 budget.

The three-year budget approved in 2023 set out spending of $153 billion for each of 2023, 2024 and 2025. There was a deficit of about $49 billion in 2023.

The budget was based on an average oil price of $70 a barrel and production of 3.5 million barrels per day, including nearly 400,000 bpd from the Northern Kurdistan region.