EXCLUSIVE: US WARNING: IRAQ HAS ONLY FIVE MONTHS’ WORTH OF “FINANCIAL BUFFERS” TO AVOID “THE MOTHER OF ALL CRISES”
Mustafa Hashim
On Wednesday, economist Ziad Dawood painted a “bleak” picture of the future of the Iraqi economy in light of the sharp fluctuations in global oil prices, warning that the country could find itself facing “bitter choices” within a few months if the growing financial gap is not addressed.
In remarks made during economic discussions at the Iraq Dialogue Day at the Atlantic Council in Washington, which was attended by a correspondent from Shafaq News Agency, Dawood explained that Iraq is currently experiencing a state of “excessive dependence” on oil revenues, which makes its budget more vulnerable to external shocks than it was in the crises of 2008, 2014 and 2020.
SALARIES AND CURRENCY VALUE
Dawood defined the concept of “economic crisis” in Iraq with two main axes that represent the existential obligations of the state:
1. Currency stability: Maintaining the dinar’s peg to the dollar at its current levels.
2. Salaries and obligations: The ability to pay employee salaries, wages, and pensions without delay.
Daoud warned that failing to meet either of these commitments would mean entering “the mother of all crises,” stressing that the process of “currency revaluation” (devaluing the currency) is a painful process economically and socially.
NARROW SAFETY MARGIN
The economist presented a detailed calculation to estimate the length of time Iraq could withstand the decline in oil revenues:
Reserves: The Central Bank of Iraq has approximately $100 billion.
Currency cover: To ensure the stability of the dinar and maintain the circulating money supply, the central bank needs to allocate about $75 billion as cover.
Available surplus: Iraq practically has only $25 billion left that can be used to cover the deficit.
Payroll: The annual cost of salaries and pensions is approximately $64 billion, which is equivalent to about $5.3 billion per month.
The result: According to Dawood, the available surplus ($25 billion) is only enough to cover salaries for five months in the event of a sharp interruption or decline in oil revenues, before the country reaches “the brink of collapse”.
POST-WORLD CUP PREDICTIONS
Dawood indicated that Iraq may experience a period of relative stability until next July, coinciding with the celebrations for the 2026 World Cup, but he expressed deep concern about the price levels and economic pressures that will follow this period.
He concluded his statement by emphasizing that Iraq faces “difficult choices,” as dependence on oil has increased rather than decreased, making any disruption in global markets a direct threat to the social and economic stability of Iraqis.
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