Iraq’s parliament endorsed on Monday dawn the largest budget in the country’s history at 198.91 trillion Iraqi dinars ($153 billion), with a deficit of 64.36 trillion dinars.
This comes after months of political wrangling and four days of voting on individual articles.
Supporters of the budget pointed out that it will expand Iraq’s social safety net, including state food rations while allocating significant spending for critical infrastructure.
The approved budget projects 2023 revenue at about $103.3 billion, based on an expected price of $70 per barrel for oil exports, the main source of income for Iraq.
Meanwhile, the exports were estimated at 3.5 million barrels a day, including 400,000 thousand barrels from the Kurdish region. The budget estimates a deficit of about $48 billion.
“The new budget is a cause for concern, as it relies heavily on oil revenue,” said Mudhar Mohammed Salih, al-Sudani’s adviser for financial affairs. “If oil prices drop, the deficit will increase, forcing the government to borrow money. This is a risky proposition, as it could lead to debt problems.“
Last month, the International Monetary Fund (IMF) warned that the “fiscal loosening” proposed in Iraq’s budget plan could lead to inflation and exchange rate volatility in the short run, while in the medium term, oil price fluctuations could lead to “critical macroeconomic stability risks.”
“Barring a large increase in oil prices, the current fiscal stance could lead to mounting deficits and intensifying financing pressures in the coming years,” the report said.