Iraq aims to boost non-oil revenues to 20%, driven by growth and increased tax intake

BAGHDAD — Iraq’s government is working to increase non-oil revenues to 20% of the federal budget in the coming years, driven by growth in non-oil sectors and improved tax and customs collection through digitalization, according to Mudher Mohammed Saleh, the prime minister’s economic advisor.

“There are two key pathways driving the rise in non-oil revenues, which have significantly contributed to the federal budget resources, as highlighted by Prime Minister Mohammed Shia Al-Sudani,” Saleh told the Iraqi state news agency on Saturday.

He explained, “The first pathway is the increase in non-oil GDP growth, which now approaches 6% annually. This marks a significant leap in productive activities across sectors outside the oil industry, particularly in transportation, digital communication technology, housing, construction, infrastructure, agriculture, and notable industrial transformation.”

The second pathway, according to Saleh, involves enhanced public revenue from tax and customs collection. He attributed this improvement to “strict discipline in tax and customs revenue collection, achieved through the introduction of digital operations and automation systems, as well as an expansion in addressing previously neglected tax sectors.”

Al-Sudani highlighted significant economic achievements during an interview with an Iraqi state news agency Thursday, emphasizing progress in non-oil revenues, unemployment, poverty, and inflation rates. “Non-oil revenues have been a key focus for our government, increasing to 14% of the budget, up from 7% previously,” Al-Sudani stated.

He also reported a decline in unemployment from 16.5% to 14.4% and a reduction in poverty levels from 23% to 17%. Furthermore, inflation has seen a decrease from 6.1% in 2021 to 2.5% today.

Saleh said that this progress aligns with the government’s broader economic reform agenda, aiming to increase the share of non-oil revenues to 20%, up from the current less than 10%.

“This objective is closely tied to the growth of non-oil GDP on one hand and maximizing traditional revenue sources, including direct and indirect taxes and other related government income streams, on the other,” he explained.

Saleh concluded by stating that this integrated approach creates a “complementary relationship between financial sustainability and economic sustainability over time, serving as one of the most critical goals of the government’s reform program.”

Iraq’s economy is predominantly driven by the oil sector. In 2022, crude oil export revenue constituted an estimated 95% of Iraq’s total government revenues, according to the International Monetary Fund.