Iraq's budget deficit surges 346% as oil revenues slump

Iraq's budget deficit increased by 346% year-on-year, reaching 36.26 trillion Iraqi dinars ($23.9 billion) in the first nine months of 2026 due to slumping oil revenues. Government expenditures totaled 89.08 trillion dinars, while revenues were only 52.82 trillion dinars, covering just 59.3% of total spending. RIYADH: Iraq's budget deficit surged 346 percent year on year to 36.26 trillion Iraqi dinars ($23.9 billion) in the first nine months of 2026, as a steep decline in oil revenues deepened pressure on public finances. Government expenditure reached 89.08 trillion dinars through September, against total revenues of 52.82 trillion dinars, according to data from the Iraqi Ministry of Finance. Revenues covered just 59.3 percent of spending. Spending pressures weigh on Iraq's fiscal outlook Oil revenues fell 50.8 percent from a year earlier, underscoring the risks facing an economy heavily dependent on crude exports. The deterioration comes as disruptions to oil production and shipments linked to the conflict in the Middle East add to pressure on the country's fiscal position. The World Bank's October 2026 Macro Poverty Outlook projects Iraq's economy will contract by 12.4 percent this year, citing the impact of the conflict on oil production and exports. Iraq's fiscal position was already vulnerable before the conflict, reflecting its heavy reliance on oil revenues and rising public expenditure. The International Monetary Fund said in its 2025 Article IV consultation that the oil price required to balance the budget had risen to around $84 per barrel in 2024, from $54 in 2020. It had projected a fiscal deficit equivalent to 9.2 percent of gross domestic product in 2026, before the latest disruption to oil exports. The data also showed that current expenditure amounted to 85.68 trillion dinars, or 96.2 percent of total spending, while investment expenditure stood at 3.40 trillion dinars, accounting for the remaining 3.8 percent. Expenditures, revenues Employee compensation represented the largest expenditure category, at 46.13 trillion dinars. Social welfare allocations followed at approximately 20.57 trillion dinars, while debt servicing amounted to 7.95 trillion dinars. On the revenue side, oil revenues and mineral royalties accounted for the largest category, at 38.56 trillion dinars. Other revenues amounted to around 5.54 trillion dinars, while commodity taxes and production fees contributed 3.13 trillion dinars. Iraq has sought to maintain crude oil shipments through alternative routes amid continued disruption to shipping through the Strait of Hormuz. The country's Ministry of Oil said on Sept. 21 that average daily exports for September up to that date stood at approximately 2.6 million barrels, including shipments routed outside the strait. The ministry clarified that a reported daily export volume of 4 million barrels referred to a single day, rather than the monthly average, highlighting the challenges of sustaining export flows under the prevailing conditions.