Financial adviser to PM says three-year budget ‘characterized by flexibility’ amid oil price uncertainty

BAGHDAD — Iraq’s three-year federal budget was designed to remain ‘flexible’ and capable of meeting core obligations despite global economic uncertainty, the financial adviser to the prime minister said, citing mechanisms to adjust spending based on oil revenues.

In an interview with the state-run Al-Sabah newspaper, adviser Muthar Mohammed Saleh said the 2025 budget is structured around a dual-limit financial policy.

“The three-year federal budget is essentially hedged with flexibility in expenditures and was built on a financial policy known as the dual-limit policy — the upper limit is 200 trillion dinars (approximately $136.1 billion), and the optimal lower limit is 150 trillion dinars (approximately $102.1 billion),” Saleh said. He added that the budget assumes an oil price of $70 per barrel and includes a theoretical deficit of 64 trillion dinars (approximately $43.5 billion) at the maximum expenditure level.

However, concerns have grown that if global oil prices fall significantly below the $70 benchmark, the government could struggle to meet key commitments such as public sector salaries. Iraq remains heavily dependent on oil exports, and sharp or prolonged price declines may strain its ability to fulfill financial obligations in the absence of alternative revenues or borrowing measures.

Saleh’s statement to Al-Sabah:

The three-year federal budget is characterized by flexibility in expenditures and was built on a financial policy known as the dual-limit policy — the upper limit is 200 trillion dinars (approximately $136.1 billion), while the optimal lower limit is 150 trillion dinars (approximately $102.1 billion) — confirming that the budget meets all basic needs, including employee salaries, pensions, social care, as well as agricultural support and the implementation of service projects at the optimal lower limit.

The geopolitical situation in the world is witnessing expectations of easing in Russia and the Gulf, which are indicators that will ultimately lead to a wave of global economic growth.

Every 1 percent increase in global economic growth requires a 0.5 percent increase in the growth of demand for oil and gas, and so on. This is highly expected to occur rapidly after the middle of the current year.

Despite concerns that the trade war or tariff war has begun to have an effect, it will end with agreements that restore balance to markets and economies at the highest speed globally.

The three-year federal budget is essentially hedged with flexibility in expenditures and was built on a financial policy known as the dual-limit policy — the upper limit is 200 trillion dinars (approximately $136.1 billion), and the optimal lower limit is 150 trillion dinars (approximately $102.1 billion) — with an assumed oil price of $70 per barrel, and a theoretical deficit matching the maximum expenditure limit of 64 trillion dinars (approximately $43.5 billion).

The general budget can meet all basic needs — including employee salaries, pensions, social care, agricultural support, and implementation of service projects — at the optimal lower limit of 150 to 156 trillion dinars (approximately $102.1 to $106.1 billion). This corresponds to a minimum level of deficit financing through internal borrowing easily and smoothly, without affecting the stability of economic life, similar to the disciplined spending shift from the upper to the optimal limit in the 2024 budget.