In recent days, Iraq’s finance ministry published its report for May 2025, detailing total expenditures and revenues. Notably, the oil revenue figures for that month – both in the report and on the ministry’s official website – appeared to have doubled compared to the previous month.
While this may initially be a data entry error, it is important to note that the report was published two to three months after the fact. An error involving a single misplaced zero can significantly alter figures – from thousands to millions. Upon review and correction, it was noted that the revenue data for April 2025 had mistakenly duplicated the figures from March 2025. In May 2025, the corrected data appears to have combined revenue totals from both April and May.
What stands out in the corrected data is a noticeable decline in revenues – both oil and non-oil – over the five-month period from January to May 2025.
According to forecasts by JP Morgan, the International Energy Agency, and OPEC, oil prices this year are expected to range between $60 and $70 per barrel. This comes at a time when the International Monetary Fund, in its economic outlook report for Middle East and North Africa countries, states that Iraq requires oil prices of at least $80 per barrel to fully fund its budget. As a result, Iraq is likely to face a larger fiscal shortfall this year compared to last year, with a larger gap between revenues and expenditures.
Under the three-year budget plan for 2023-2025, it was decided that the federal government’s revenues and expenditures would follow a set framework, with the finance ministry preparing an updated revenue and expenditure table each year for parliamentary approval.
However, the 2025 budget table has yet to be submitted to Parliament. In practice, even when such tables are prepared, the figures often differ significantly from actual revenues and expenditures, as seen over the past two years.
In previous years, there were significant discrepancies between the oil and finance ministries regarding reported oil revenues. As a result, it was decided that the oil ministry would only publish the amount of oil exported and refrain from releasing revenue figures. However, since March of this year, the oil ministry has resumed publishing revenue data in its statements, once again raising concerns about inconsistencies between different sources of oil revenue figures.
Now the main question is: Can oil revenues cover the expenditures of both the federal government of Iraq and the Kurdistan Regional Government (KRG) in the second half of the year? Additionally, what is Iraq’s actual monthly non-oil revenue, particularly in light of the federal government’s demand that the Kurdistan Region generate 240 billion Iraqi dinars (around $183 million) in monthly non-oil revenues?
Differences in Iraq’s revenues and expenditures between the first and second halves of this year
Typically, expenditures in the first half of the year are more operational and generally lower, while the second half sees an increase due to investment spending, new projects, and rising operational costs. Therefore, the fact that Iraq’s revenues and expenditures were roughly equal in the first half of this year does not reflect an adjustment in spending caused by reduced revenues or falling oil prices.
For instance, comparing January and December of the same year highlights this pattern. According to data from Iraq’s finance ministry, total expenditures in January 2024 were 8.7 trillion dinars (around $6.6 billion), whereas by December 2024, expenditures had risen to 14 trillion dinars (around $10.69 billion), marking a 40 percent increase.
During the first five months of this year, the finance ministry reports that total expenditures – including salaries for the Kurdistan Region’s public employees – amounted to 46.9 trillion dinars ($35.8 billion), while total revenues were 46.1 trillion dinars (around $35.2 billion). This represents a shortfall of nearly 800 billion dinars (around $611 million) during this period, as detailed below:
Oil revenue and monthly distribution in Iraq
Another notable aspect of Iraq’s revenues and expenditures is the low level of non-oil revenues and investment spending. During the first five months of 2025, non-oil revenues amounted to just 4.2 trillion dinars (around $3.2 billion) while oil revenues stood at 41.9 trillion dinars (around $31.9 billion). Additionally, total investment expenditures in Iraq – excluding the Kurdistan Region – were only 3 trillion dinars (around $2.2 billion) during this period. This means that out of the 46.9 trillion dinars (around $35.8 billion) spent, merely about 6.4 percent was allocated to investment and infrastructure projects, while the overwhelming majority, 99.4 percent, was dedicated to operational expenses.
This stark imbalance is clearly illustrated in the chart below, where non-oil revenues and investment expenditures barely register compared to oil revenues and operational expenditures, which are close to tens of trillions of dinars. Despite Iraq’s economy being often described as rentier-based, it actually functions as a dependent economy heavily reliant on the monthly distribution of oil wealth among government employees – though with significant disparities.
For example, the Iraqi parliament employs only 2,216 people but allocated 229 billion dinars (around $ 174 million) for their salaries. In contrast, the agriculture ministry has nearly ten times more employees – 19,992 people – but only 72 billion dinars (around $55 million) were spent on their salaries.
The oil ministry – widely regarded as the backbone of Iraq’s economy and the source of approximately 91 percent of state revenues – employs 2,025 people and spent 11 billion dinars (around $8.4 million) on salaries over the first five months of the year. In contrast, the Iraqi presidency, with only 1,117 employees – about half the number at the oil ministry – spent 17.5 billion dinars (around $133.6 million) on salaries. That’s 6.5 billion dinars (around $4.9 million) more than the oil ministry, and 4 billion dinars (around $3.05 million) more than the industry ministry, according to available data.
Non-oil revenues in Iraq and the Kurdistan Region’s 120 billion dinar commitment
Over the past five months, Iraq’s total non-oil revenues amounted to 4.22 trillion dinars (around $3.2 billion), down 33 percent compared to 6.24 trillion dinars (around $4.7 billion) during the same period last year. The largest decline was in customs revenues: import duty collections dropped from 1.27 trillion dinars (around $967.1 million) in the first five months of 2024 to just 574 billion dinars (around $438.6 million) in 2025.
Another key point is that Iraq’s average monthly non-oil revenues, including customs and taxes, were about 840 billion dinars (around $641 million) this year. According to the latest Erbil-Baghdad agreement, the Kurdistan Region’s monthly non-oil revenues should exceed 240 billion dinars (around $183 million) – meaning nearly one-third of Iraq’s total non-oil revenues would fall to the Kurdistan Region.
While the Erbil-Baghdad agreement commits the Kurdistan Region to transfer 120 billion dinars (around $91.6 million) monthly to the federal government – half of the revenues as per the constitution – the question remains: does the Kurdistan Region actually generate 240 billion dinars (around $183 million) in monthly non-oil revenues? Although comprehensive data is unavailable, a closer look suggests this fixed figure in the agreement may be unrealistic, since revenues fluctuate month to month. For example, in Sulaimani, revenues were 62 billion dinars (around $47.4 million) in June, 128 billion (around $97.6 million) this month, and totaled around 900 billion dinars (around $686.8 million) over the past year.
Conclusion
If Iraq’s expenditures in the second half of this year mirror last year’s level of 150 trillion dinars (around $ 114.48 billion), the gap between expenditures and revenues will likely double compared to last year. It remains unclear how this deficit will be addressed, especially given that oil revenues are expected to be 10-15 trillion dinars (around $7.6-$11.45 billion) lower at the forecasted prices for 2025.
With oil prices projected to hover around $60 per barrel, Iraq’s total oil revenues could fall below $90 billion (around 117 trillion dinars), representing a shortfall of 10-15 trillion dinars (around $7.6 – $11.45 billion) compared to last year. However, economic instability and volatility persist, with daily fluctuations that could lead to significant changes in these projections.
The decline in Iraq’s non-oil revenues this year is particularly concerning, especially given the implementation of digital and technological systems intended to improve revenue collection. Instead of increasing, non-oil revenues have decreased by 2 trillion dinars (around $1.53 billion).
Additionally, the Kurdistan Region’s commitment to transfer 120 billion dinars (around $91.5 million) monthly to the federal government – based on the assumption that it generates 240 billion dinars (around $183.1 million) monthly – is questionable because when people’s salaries are delayed by three months and incomes fall, purchasing power weakens, leading to reduced tax revenues and customs income from imported goods.
Finally, looking at annual expenditure and revenue trends, Iraq spent 58.2 trillion dinars (around $44.4 billion) in the first half of 2024, which surged to 150 trillion dinars (around $114.4 billion) by year-end.
The critical question now is: can Iraq sustain this trajectory in 2025 or will it need to draw down its reserves? Another possibility is suspending investment projects, a measure the country has resorted to multiple times in the past. The most sustainable solution, however, lies in restructuring expenditures and diversifying revenue sources. For now, we must wait and see which path Iraq chooses.
