The increase in Iraq's domestic debt reflects a broader economic challenge tied to fluctuating oil prices and the need for diversification in revenue sources.
Government reliance on oil revenues poses a risk, especially with potential price drops, necessitating urgent reforms in fiscal policy and revenue generation.
The issuance of government bonds is seen as a strategic move to manage the financial deficit and stabilize the economy in the short term.
Without significant reforms in non-oil revenue generation, Iraq may continue to face budgetary pressures and reliance on debt financing.
If oil prices decline further, the government may need to accelerate efforts to diversify its economy and revenue sources to maintain financial stability.
Baghdad - The Iraqi government is grappling with significant challenges as domestic debt has surged to a record level of 80 trillion dinars ($61 billion) during the first nine months of 2024. This increase is largely attributed to a projected financial deficit and a heavy reliance on oil revenues, which have recently seen a decline in prices. Economic experts are emphasizing the need for a shift in the methodology of non-oil revenues and the exploration of new financial sources to achieve future financial stability.
According to economic analyst Nabil Al-Marsoumi, the increase in internal public debt highlights a substantial deficit in the current year’s budget, with the Central Bank of Iraq reporting a monthly increase in internal debt exceeding one trillion dinars. This trend underscores the widening gap between government revenues and expenditures.
Moeen Al-Kadhimi, a member of the Finance Committee of the Iraqi Parliament, stated that the government’s debts range between 70 trillion and 80 trillion dinars, which he considers manageable and typical for nations globally. Despite the planned budget for 2024 being 211 trillion dinars ($161 billion), actual spending has not surpassed 100 trillion dinars ($76 billion), leading to a reliance on available cash to cover salaries and essential expenses.
While the internal debt is significant, economic expert Diaa Al-Mohsen believes it will not adversely affect employee salaries or government programs. He noted that the Iraqi government is moving towards issuing various types of bonds to address the financial deficit, which could help reduce the internal debt over time. Currently, internal debt constitutes about 14.5% of Iraq's GDP, and Al-Mohsen asserts this level is unlikely to impact economic stability significantly.
The investment budget remains low at 34 trillion dinars ($26 billion), which is minimal compared to the overall budget of over 122 trillion dinars ($93 billion). Therefore, while the increase in domestic debt is notable, it is not expected to substantially hinder government projects or employee salaries, as the government prioritizes social services over economic initiatives.
