Economist: Iraq has become a “salary state” and the oil crisis threatens to paralyze it.

Financial expert Mahmoud Dagher confirmed on Monday that public finances in Iraq have turned into something resembling “salary finances” since 2004, as a result of the almost complete reliance on oil revenues to cover monthly operating expenses, primarily the salaries of employees, retirees and social welfare.

Dagher told Shafaq News Agency that “the continuous expansion in government appointments during the past years has led to an inflation of operational spending, so that most of the oil revenues are allocated to cover salaries, pensions and social assistance, which has made the success or failure of governments linked to their ability to secure salaries and disburse them on time.”

He added that “any oil crisis or halt in exports could paralyze public finances, as happened during previous crises or in light of current regional tensions, which may force the government to resort to exceptional options to provide liquidity, including discounting treasury remittances through the central bank.”

He explained that “the available alternatives are still limited in the short term, due to weak non-oil revenues, limited tax collection, the difficulty of diversifying the economy after two decades of dependence on the public sector, as well as the widening phenomenon of disguised unemployment and the dependence of large numbers of citizens on government jobs as a main source of income.”

Dagher pointed out that “the continuation of the crises for a long period may push the government to take austerity or temporary measures to alleviate the pressure on the budget, including improving the collection of electricity and water services, postponing the disbursement of some financial dues to farmers and contractors, reducing luxury imports, as well as freezing allowances, promotions, bonuses and profits.”

The financial expert continued, saying that the “zero oil revenue” scenario puts Iraq in front of difficult economic and political choices, in light of rising financial obligations and increasing social pressures, which makes dealing with the crisis more complicated and costly for the state and society.

The Iraqi economy is almost entirely dependent on oil, which accounts for about 90 to 95% of budget revenues, making any disruption to exports a direct challenge to the government’s ability to finance operating expenses, especially salaries, pensions and social welfare, with a monthly need estimated at about 9 trillion dinars ($6.8 billion).

Experts suggest that the continued halt or decline in exports may push Iraq to rely on part of its foreign reserves, which could affect monetary stability if the crisis lasts for a long time, given the limited reliance on export alternatives or non-oil revenues.

The war between the United States and Israel on one side and Iran on the other has caused a near-complete paralysis of navigation in the Strait of Hormuz, leading to a decrease in Iraqi exports to less than 800,000 barrels per day and losses estimated at about $128 million per day, according to the Eco Iraq Observatory, amid rising shipping and insurance costs and increasing fears of global economic repercussions due to the importance of the strait through which about 20 million barrels of oil pass per day.

Shafaq.com

Iraq reopens its airspace and resumes flights

The Iraqi Civil Aviation Authority announced on Monday the reopening of Iraqi airspace to flights to and from all Iraqi airports.

The authority stated in a statement received by Shafaq News Agency that “the decision to reopen the airspace comes after assessing the situation in coordination with the relevant authorities, in order to ensure the continuation of air traffic according to the highest standards of safety and security.”

The authority confirmed, according to the statement, that it continues to monitor and assess developments continuously in cooperation with the relevant authorities, to ensure the safety and security of Iraqi airspace.

She added that “it will notify airlines and passengers of any developments or updates related to air traffic through official and approved channels.”

It is worth noting that the Iraqi Civil Aviation Authority announced on Sunday evening the closure of Iraqi airspace to all incoming, outgoing and transit flights for 72 hours as a temporary and precautionary measure, against the backdrop of renewed conflict between Israel and Iran.

Shafaq.com

Iraq on the brink of a financial storm: Will the emergency plan save the economy before it’s too late?

In the world of economics, crises don’t begin the day governments announce their inability to pay salaries, nor when foreign currency reserves plummet to dangerous levels. Rather, they begin when countries ignore the early warning signs of an impending storm. Today, Iraq faces one of its most critical economic phases in years, not only due to the decline in oil prices, but also as a result of escalating regional challenges that threaten the lifeblood of the Iraqi economy: oil exports.

Iraq relies on oil for more than 85% of its budget revenues, making its economy highly sensitive to any disruption in global markets or oil export routes. With escalating tensions in the Gulf region and the risks associated with the Strait of Hormuz, Iraq faces the possibility of some of its oil exports being disrupted or reduced—a scenario that could directly impact government revenues, monetary stability, and the dinar’s exchange rate.

The risks are compounded by the prolonged disruption of Kurdistan Region oil exports, which has deprived the Iraqi treasury of billions of dollars that could have boosted revenues and eased financial pressures. Meanwhile, the state continues to bear a massive burden of salaries, subsidies, and operational expenses, while non-oil revenues remain limited and unable to offset any significant decline in oil revenues.

Despite these challenges, Iraq still possesses significant strengths. The country has substantial cash and gold reserves, foreign assets, and financial bonds, in addition to vast oil reserves and a strategic geographic location linking the Gulf to Turkey and Europe. However, the fundamental problem lies not in a lack of resources, but in how they are managed and in the speed with which appropriate decisions are made before the current pressures escalate into a wider financial crisis.

Hence the importance of adopting an urgent economic and financial emergency plan based on several parallel tracks. The first of these tracks is the resumption of oil exports from the Kurdistan Region through a temporary agreement between Baghdad and Erbil that guarantees the resumption of oil flows as quickly as possible. Every day that passes without the resumption of these exports means further revenue losses and increased pressure on the budget.

The second key area concerns protecting foreign currency reserves and managing the dollar more efficiently. Instead of depleting reserves or selling strategic assets, Iraq can utilize modern financial instruments that allow for temporary liquidity while preserving its financial assets. Priority should also be given to importing essential goods and raw materials necessary for production, while limiting luxury imports and unnecessary transfers that drain hard currency.

The third focus is on increasing non-oil revenues, which still constitute a modest percentage of the state’s resources. Iraq possesses significant potential in the areas of customs, taxes, and government services; however, weak tax collection, administrative corruption, and the informal economy continue to limit the state’s ability to utilize these resources.

The current crisis should also be used as an opportunity to redirect investments towards productive sectors, particularly electricity, gas, manufacturing, transportation, and logistics. These sectors not only provide employment opportunities but also contribute to reducing reliance on imports and generating added value within the national economy.

One area that deserves special attention is the digital economy. Iraq has a large youth population capable of working in software, digital services, e-commerce, and artificial intelligence. Given the limited opportunities for traditional employment, the digital economy can be one of the fastest ways to create jobs, increase income, and diversify sources of economic growth.

But the real danger lies not just in the decline in revenues, but in how they are managed. If any additional resources are used to expand consumer spending and unproductive employment, the crisis will return soon afterward. However, if these resources are directed toward investment, production, and improving infrastructure, Iraq could transform the current crisis into a springboard for a more diversified and sustainable economy.

Global economic experience has proven that nations do not prosper solely through abundant resources, but also through their ability to manage crises and make difficult decisions in a timely manner. Iraq today faces a true test. It possesses oil, reserves, a strategic geographic location, a domestic market, and human resources, but it needs a clear economic vision that prioritizes production and investment over short-term considerations.

Ultimately, the most crucial question is not whether Iraq possesses sufficient resources to overcome the crisis, but rather whether it has the political will and institutional capacity to utilize these resources before it is too late. Time has become an economic factor as vital as oil itself, and the longer reforms are delayed, the higher the cost of addressing the problem will be. Between opportunity and risk, Iraq stands today at a moment that could shape its economy for the next decade.

Economic Studies Unit / North America Office,

Rawabetcenter.com

MP: Initial understandings reached between political blocs and the Prime Minister to pass the oil and gas law

MP Adel Al-Mahalawi confirmed on Saturday that there are initial understandings between political blocs and the Prime Minister regarding proceeding with the passage of the oil and gas law in the coming period.

Al-Mahalawi told the Information Agency that there is political activity and initial understandings between political forces and the Prime Minister aimed at creating the necessary atmosphere for passing the oil and gas law, which is considered one of the important laws that has been long awaited.

He added that the law represents a fundamental step in regulating the management of oil wealth and defining the relationship between the federal government, the regions, and the oil-producing governorates in a way that guarantees the preservation of rights and achieves fairness in the distribution of revenues.

He indicated that the coming period may witness further dialogues and agreements between political parties to reach a final version that is acceptable to all concerned parties, in preparation for presenting the law to the Council of Representatives for a vote.

Almaalomah.me

Government advisor: Exchange rate stability has boosted citizens’ purchasing power

The financial advisor to the Prime Minister, Mazhar Muhammad Saleh, confirmed on Saturday that the government, headed by Ali Falih al-Zaidi, has taken measures to preserve the purchasing power of the dinar and curb inflation.
Saleh said in a press statement followed by Al-Furat News: “The policy of stabilizing the official exchange rate is based on a fundamental goal, which is to protect the external value of the national currency and maintain the stability of the general price level,” noting that “the stability of the exchange rate has contributed to strengthening confidence in the Iraqi dinar and supporting the purchasing power of citizens.”

Saleh added that “the relationship between the stability of the exchange rate and the stability of prices of goods and services in the local market has remained close, given the limited impact of the parallel market on the pricing system and the effectiveness of monetary policy,” explaining that “financing imports through the official banking system and relying on the state’s foreign reserves has contributed to providing imported goods at stable and controlled prices.”

He added that “government policies to maintain stable prices for goods and public services, along with the expansion of modern commercial distribution patterns, particularly cooperative stores and advanced marketing formulas, have strengthened competition and contributed to reducing inflationary pressures and supporting price stability.”

Saleh explained that “among the most prominent factors that put pressure on the value of the national currency are the decline in official reserves, uncontrolled monetary expansion, and excessive reliance on oil revenues, which are currently subject to geopolitical restrictions imposed on the freedom of energy markets, as well as political and regional tensions and their effects on foreign exchange flows and economic confidence.”

He stressed that “raising the value of the Iraqi dinar is not achieved through quick administrative decisions, but rather through a long-term reform process based on the stability of monetary and financial policies, diversification of national income sources, and strengthening confidence in the local currency,” noting that “the stability of the dinar remains a direct reflection of the stability of the macroeconomy and its ability to cope with local and international changes, which is what the government is working on through a package of measures to strengthen the value of the Iraqi dinar, including working to strengthen foreign reserves, diversifying the national economy and reducing dependence on oil, achieving stability in the balance of payments, as well as controlling the parallel market, reforming the banking system, expanding the use of electronic payment tools and promoting financial inclusion.”

Alforatnews.iq

Al-Zarkoushi: A session to complete the ministerial portfolios is possible during this week.

On Saturday, Abdul Samad al-Zarkoushi, a member of the Coordination Framework, confirmed that holding a session of the Iraqi Parliament to finalize the remaining ministerial portfolios in Ali al-Zaidi’s government this week is possible, pending the completion of political agreements.

Al-Zarkoushi told Al-Maalouma that “all political forces, including the Coordination Framework, agree on the necessity of completing the vote on the remaining ministerial portfolios in Ali al-Zaidi’s government.” He explained that “the possibility of holding a parliamentary session to resolve these issues this week is very likely, pending political agreements expected to become clear within the next 72 hours.”

He added that “finalizing the ministerial portfolios is important, especially since they include ministries with political, service, and security dimensions, such as the Ministries of Interior, Defense, and Planning.” He pointed out that “the next phase is extremely important, especially given the presence of sensitive and complex issues awaiting a government roadmap, particularly in the financial and economic sectors.”

Al-Zarkoushi stressed that “completing the government formation is essential for managing the ministries and proceeding with the plans developed to address many past issues.”

Almaalomah.me

Al-Shaalan: The parliament’s leadership is obligated to hold a session to complete the cabinet formation.

On Saturday, Ali al-Shaalan, a member of parliament from the State of Law Coalition, asserted that the Speaker of Parliament is obligated to convene an extraordinary session during the legislative recess to finalize the remaining ministerial appointments in Prime Minister Ali al-Zubaidi’s cabinet. He accused the Speaker’s office of obstructing the confirmation of several ministers during the confidence vote session.

Al-Shaalan told the Information Agency, “Completing the cabinet is a constitutional and political imperative that cannot be further delayed. Therefore, the Speaker of Parliament must call for an extraordinary session during the legislative recess to resolve this issue.”
He added, “Some ministries were not finalized during the confidence vote session due to procedures and actions by the Speaker’s office that hindered the confirmation of several nominees.” He explained that “political forces are still holding firm to their nominees and are striving to complete the government formation as quickly as possible.”

He pointed out that “the current stage requires the cooperation of all political parties to fulfill the government’s obligations and provide the appropriate conditions for the government to function effectively.”

Almaalomah.me

The framework strengthens its political position… new parliamentary alliances and pressure to finalize the remaining ministerial appointments.

The political arena is witnessing rapid activity within the Coordination Framework forces, coinciding with ongoing disputes regarding the completion of the cabinet and outstanding issues between Baghdad and Erbil. This comes amidst indications that some forces are seeking to bolster their parliamentary influence and leverage available negotiating leverage to resolve political entitlements. In this context, former MP Hussein Mardan revealed moves led by the State of Law Coalition to strengthen its position within the Council of Representatives, confirming its success in attracting more than ten MPs, including independents, in the recent period.

Mardan explained to Al-Maalomah News Agency that there are efforts underway to form a broad alliance comprising more than 100 MPs, which would grant the Coordination Framework and its allies greater weight in managing political and legislative matters in the coming phase. Meanwhile, Aqeel al
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Rudaini, spokesperson for the Victory Coalition, asserted that the anticipated meeting of the Coordination Framework may not succeed in resolving the existing political disputes, pointing to the continued divergence regarding the completion of the cabinet and the allocation of sovereign ministries.

Al-Rudaini told Al-Maalomah News Agency that the Ministries of Defense and Interior remain a major sticking point in the negotiations, as some political forces cling to their entitlements and refuse to relinquish their shares within the government. Meanwhile, political analyst Atheer Al-Shara’a called on the forces within the Coordination Framework to leverage the issue of ministries allocated to Kurdish parties within the government formation to address outstanding issues between Baghdad and Erbil.

He pointed out that the Ministries of Planning and Reconstruction, which are allocated to the Kurdish component, have not yet been finalized, giving political forces an opportunity to use this issue as a bargaining chip to push the regional government towards fulfilling its constitutional and legal obligations. Al-Shara’a emphasized in a statement to Al-Maalomah News Agency that among the most prominent issues that must be addressed is the transfer of oil and non-oil revenues to the federal government, in addition to proceeding with the enactment of the oil and gas law and resolving the accumulated disputes between the central government and the region.

He added that the continued failure to adhere to signed agreements has cast a shadow over the management of natural resources and the economic situation, requiring clear understandings that guarantee the rights of all parties within the constitutional framework. A crucial negotiating phase is underway, and observers believe the coordinating framework is seeking to bolster its political standing within parliament while simultaneously managing complex negotiations concerning the formation of the government and the relationship with the Kurdistan Region. The vacant ministerial posts and the mutual obligations between Baghdad and Erbil appear to be among the most prominent bargaining chips in the coming period.

Almaalomah.me

The Prime Minister reveals “important” decisions in the areas of economy, energy, and security.

Prime Minister Ali al-Zaidi revealed on Saturday “important” decisions in the fields of economy, energy, security, and others related to the poor and public sector employees.
A statement from the Cabinet, received by the Information Agency, indicated that “al-Zaidi confirmed the imminent issuance of important decisions for the country in the areas of economy, energy, security, and preserving sovereignty.”
He added that “other decisions will be issued concerning citizens from the poor class and public sector employees.”

Almaalomah.me

A Chinese tanker carrying two million barrels of Iraqi oil departs the port of Basra.

A source at Iraqi ports reported on Saturday that a Chinese oil tanker carrying approximately two million barrels of oil had departed from the port of Basra in the far south of the country.

The source explained to Shafaq News Agency that the Chinese tanker (Kiara – M), which carries the flag of (San Marino), recently arrived at the Basra oil port and loaded two million barrels of oil, adding that the tanker left the export terminals earlier today after completing its loading of Iraqi crude oil.

This comes as the northern port of Umm Qasr received, on June 1st, the first cargo ship coming directly from China via the Strait of Hormuz, despite the ongoing tensions in the region.

Shafaq.com