Iraq's budget: political fiscal gaps threaten national stability in 2025

Shafaq News

a day ago

Shafaq News/ By mid-2025, Iraq finds itself ensnared in a deepening fiscal and political crisis. The government has yet to submit the budget tables for the 2025 federal budget to Parliament—more than six months into the fiscal year.
What began as a delay has evolved into a systemic disruption, with experts and lawmakers warning that the stalled budget threatens not only government functionality but also the daily stability of millions of Iraqis—particularly the most vulnerable segments of society.
A Tripartite Budget Under Pressure
This budgetary paralysis is unfolding despite the legislative innovation of the tripartite budget, passed in 2023 under Law No. 13. The law allowed for a unified budget covering three fiscal years—2023, 2024, and 2025—intended to streamline financial governance, support long-term investment projects, and ensure timely salary disbursements.
Yet, the framework has struggled against economic headwinds and entrenched political dynamics. The 2023 budget, valued between 199 and 211 trillion Iraqi dinars (around $153 billion), was formulated based on oil priced at $70 per barrel. However, global oil prices fell to nearly $55 per barrel, creating a substantial shortfall. The resulting fiscal deficit reached nearly 63.6 trillion dinars ($48.5 billion), severely curbing capital investment and forcing the suspension of numerous infrastructure and service projects.
In 2024, despite a larger budget of 211–213 trillion dinars (approximately $162 billion), the fiscal deficit remained nearly identical. The outlook for 2025 projects a similar deficit of 64 trillion dinars (around $48 billion).
Economic expert Abdulrahman al-Sheikhly explained to Shafaq News that 'all projects were included in the tripartite budget, but the drop in oil prices created a deficit that halted funding for investment projects.' Nevertheless, Sheikhly reassured that 'operating budgets covering salaries, pensions, and social welfare remain secure—even if oil prices fall to $40 per barrel.'
Budget as Political Leverage
At the heart of the current crisis lies a broader shift in the budget's purpose—from a vehicle for national development into a tool of political leverage. Increasingly, it has become a bargaining instrument among rival political blocs, particularly during election cycles.
As Iraq prepares for parliamentary elections scheduled for November, the budget has become deeply entangled in campaign dynamics and factional calculations.
Political factions have reportedly delayed the submission and approval of the budget tables in hopes of extracting concessions—whether in the form of greater allocations for their constituencies, control over ministries, or key appointments. Political analyst Mujashaa al-Tamimi told Shafaq News that the delay is 'not merely a technical failure, but another example of how the budget becomes a political instrument during elections.'
With the vote approaching, parties are leveraging the deadlock to promise voters budgetary relief or to accuse rivals of blocking resources. Al-Tamimi warned that 'the lack of legislative stability is being exploited to expand unplanned expenditures and delay key entitlements—bonuses, promotions, and financial rights for provinces and executing entities.'
He added, 'This jeopardizes fiscal stability, erodes investor confidence, and burdens ordinary citizens and employees with the costs of political procrastination.'
Even more concerning, al-Tamimi forecasted that should post-election government formation be delayed, Iraq may enter 2026 without a federal budget—operating instead on emergency monthly disbursements as stipulated under the Financial Management Law. Such a scenario would severely limit the government's ability to launch new projects or respond to emerging crises.
Regional Inequities and Service Breakdown
The effects of the budget deadlock are being felt acutely in Iraq's provinces. Areas like Al-Diwaniyah, Babil, Muthanna, and Karbala have borne the brunt of financial stagnation. Deputy head of Parliament's Regions and Governorates Committee, MP Jawad al-Yasari, told Shafaq News that financial allocations for these provinces were calculated based on outdated population data, neglecting current demographic realities. 'Local governments are unable to implement service projects because of the limited financial allocations,' he said.
MP Mahdiya al-Lami described Al-Diwaniyah as 'a service disaster area,' citing dire shortfalls in infrastructure related to water, healthcare, and education. In Babil, only 6% of the planned 2023 infrastructure projects have been completed, according to Shafaq News inquiry.
Al-Lami added that provinces like al-Anbar and Saladin, still recovering from the aftermath of ISIS and military operations, remain underserved due to delayed fund disbursements.
She also pointed to longstanding, stalled projects—such as the Najaf sewage system and the Mahmudiya water plant—that have suffered from chronic underfunding. Contractors and construction companies in Baghdad, she noted, are now staging regular protests at the Baghdad Municipality's project offices, demanding payment for services rendered.
Sociologist Ruqayya Salman drew a direct correlation between the budget delay and growing societal instability. 'The living conditions of most Iraqis are now hostage to political fluctuations,' she told Shafaq News.
'The repeated delay in passing the budget disrupts service and development projects, postpones salaries and entitlements, and undermines employment opportunities—destabilizing Iraqi families, especially those dependent on social welfare or temporary contracts.'
She added that these conditions have 'deepened the gulf between the state and the citizen, exacerbated youth frustration, and increased migration, unemployment, and domestic violence.'
Salman also warned that 'the erosion of the middle class and price hikes resulting from unpaid salaries are pushing Iraqis toward social despair while the political class remains untouched.' The budget, she emphasized, must serve as a tool for social justice and national development—not a political scorecard.
Constitutional Violations and Legal Concerns
Beyond its economic and social impacts, the delay also carries constitutional implications. Legal expert Abbas al-Uqabi told Shafaq News that withholding legally mandated financial disbursements is a prosecutable offense under Article 93/Third of the Iraqi Constitution. 'Delaying financial entitlements included in the general budget law is prosecutable… these actions are no less serious than direct financial corruption,' he said.
Parliamentarian Hussein al-Saabari has already taken legal action, accusing the government of violating the constitutional requirement that budget tables be submitted before the end of the fiscal year. As of June, the deadline had been exceeded by over six months, further eroding legislative accountability.
A Fragile Financial Outlook
The broader fiscal outlook remains deeply uncertain. The Finance Committee has issued warnings about a looming liquidity crisis stemming from falling oil revenues, weak non-oil sector performance, and stalled investment. Some ministries have resorted to using contractor tax deposits to meet payroll needs—a temporary fix that risks future instability if revenues do not recover or if the political deadlock continues.
Despite holding over $100 billion in foreign reserves, experts caution that relying on this buffer without introducing structural reforms—such as revenue diversification or private sector revitalization—could jeopardize Iraq's financial sovereignty in the long term.
In response to the stalemate, some policymakers have suggested adopting an emergency 'spending mechanism' to release funds for essential services, if the full budget cannot be passed.
As the months pass without a resolution, the consequences are becoming more pronounced. Delayed salaries, frozen projects, and public disillusionment are eroding trust in state institutions. Unless the federal government moves decisively to separate budgetary planning from political infighting, the costs will continue to mount—not just in dinars, but in credibility and stability.