Iraq’s Record 2027 Budget Rests On Fragile Assumptions

30 Oct 2026 Issue: 69 / 44 By: Yesar Al-Maleki

Iraq’s draft 2027 budget assumes record revenues and spending despite the risk of prolonged regional conflict. The calculations rely on optimistic oil export forecasts and the additional dinar revenues generated by the recent currency devaluation. The proposed budget does not address the growing burden of public sector salaries and welfare spending. It also threatens to deepen tensions between Baghdad and the Kurdistan Region.

Iraq’s finances have been battered by the Middle East conflict, which caused oil export revenues to fall by nearly 90% from pre-conflict levels to just $837mn in May before partially recovering over the summer. The fiscal shock forced Baghdad to resort to domestic borrowing (MEES, 12 June), while also delaying payments to contractors. Yet rather than tackling structural inefficiencies and strengthening public finances, Baghdad has opted to prepare another expansionary budget.

The government is essentially gambling on a surge in oil exports next year enabling a ID27 trillion increase in oil revenues. But this is contingent on regional geopolitical developments outside of its control, leaving Iraq’s fiscal fortunes dependent on decisions made in Washington D.C. and Tehran. Even then, budget assumptions of 4mn b/d in crude oil exports are unlikely to be achievable given infrastructure constraints. (CONTINUED - 3373 WORDS)