12% non-oil revenues in 2024: how can Iraq overcome the oil curse?, 5 JAN

12% non-oil revenues in 2024: how can Iraq overcome the oil curse?

Shafaq News/ Iraq recorded a significant rise in non-oil revenues by the end of 2024, reaching 12% of total public revenues, compared to 7% in 2023. However, economic experts argue that this figure falls short of the government’s planned target.

In an interview with Shafaq News agency, economist Nabil Al-Marsoumi stated that "the total non-oil revenues achieved in Iraq as of October amounted to 14.438 trillion dinars (more than 39 billion USD), representing 12% of total public revenues, compared to 7% in 2023."

The government had aimed for 27 trillion dinars in non-oil revenues or 20% of total public revenues, but this goal has not yet been met, with only half of the target achieved so far.

Al-Marsoumi confirmed that "Prime Minister Al-Sudani planned to achieve 20% of public revenues from non-oil sources, but this has not been realized either, with only 12% achieved so far, just exceeding half the target."

The rise in non-oil revenues, which include taxes, fees, state-owned enterprise profits, and other financial sources, is vital for Iraq's economy. Experts emphasize that the main objective is to reduce the country’s dependence on volatile oil revenues due to fluctuating prices.

The biggest challenge Iraq faces in boosting non-oil revenues is the lack of economic diversification. Al-Marsoumi urged the government to "increase agricultural, industrial, and other economic activities within the GDP, by creating an internal economic cycle that secures job opportunities for citizens."

Oil contributes to about half of Iraq's GDP. Experts stress that Iraq still lacks a clear developmental plan supported by legal frameworks.

Al-Marsoumi noted, "When production diversifies, we need an efficient tax system capable of channeling tax revenues into the public treasury. In reality, we are far from this."

Doubling Non-Oil Revenues

Economic expert Mustafa Hantoush believed that one of the key factors behind the increase in non-oil revenues in Iraq during 2024 is the success of the United Nations’ SCOD program. This initiative has led to a significant shift, with many containers now coming through "regulated customs" rather than entering haphazardly, which has helped double customs and border revenues.

In his remarks to Shafaq News, Hantoush added, "Some self-financing companies have contributed to higher non-oil revenue rates. The state has also been able to withdraw part of these companies' revenues and return them as needed."

However, non-oil revenues suffer from two key challenges: the lack of legal frameworks that allow the state to claim revenues from various sectors, and the absence of electronic systems. For example, when the Central Bank transfers $65 billion for purchasing goods, customs and taxes worth $6 billion should be collected from these amounts. However, only about $1.5 billion has been collected to date.

Hantoush believed that "linking the Central Bank’s operations with remittances, credits, and customs processes, and collecting fees in advance, could significantly increase non-oil revenues." Examples of this include collecting insurance and tax fees on goods upfront, as well as automating tax and traffic revenue systems.

Experts agree that increasing non-oil revenues would allow the government to operate with a broader financial space. There are many potential sources of non-oil revenue, including fees from the Ministry of Oil, Electricity, Transport, and Communications, as well as the full utilization of these sectors' capabilities.

Hantoush also pointed to state-owned facilities with massive untapped wealth, such as the Baghdad Municipality and other municipalities with significant property holdings, urging the government to exploit these assets through specialized committees to help boost state revenues.