From burden to strategy: Iraq cuts debt, targets growth

 Shafaq News – Baghdad

Iraq is advancing a fiscal plan to reduce over $114B in public debt, aiming to enhance credit ratings, expand policy flexibility, and reallocate resources to long-term infrastructure development.

Domestic debt edged down in April to 85.5T IQD ($60.2B), from 85.53T ($60.23B) in March, according to Central Bank (CBI) data, after repayments to financial institutions, lowering their outstanding share to 19.11T IQD ($13.45B).

Additional internal liabilities include 756B IQD ($532M) owed by the Ministry of Finance, 51T IQD ($35.91B) in treasury transfers held by the central and commercial banks, 2.03T IQD ($1.43B) in ministry-backed treasury notes, and 12.57T IQD ($8.85B) in deferred payments, largely owed to farmers.

Foreign obligations have also declined. CBI reported on June 14 that Iraq’s external debt dropped to $54.6B in 2024, down 2.94% from $56.2B in 2023. About $9B is due by 2028, with an additional $9B linked to long-term loans from international reconstruction funds.

Debt Within Global Thresholds

Analysts highlight that Iraq’s debt ratios remain within safe international bounds. External debt constitutes less than 8% of GDP, placing Iraq in a low-risk category that supports credit stability and foreign investor interest.

Speaking to Shafaq News, Prime Minister's financial adviser Mudhhir Mohammed Saleh described the current policy direction as “fiscal consolidation,” where controlled debt growth aligns with reduced budget deficits, a central goal in the government's economic roadmap.

Decreasing reliance on borrowing, he added, "improves Iraq’s credit standing, lessens exposure to risk, and attracts foreign investment."

Additionally, easing internal debt alleviates pressure on local liquidity. “Lower sovereign borrowing allows commercial banks to extend more credit to the private sector, fueling domestic growth,” he noted.

Repayment Plans

Also speaking with Shafaq News, financial analyst Safwan Qusay proposed using state-owned assets to settle internal debt. “The Ministry of Finance can convert real estate into tradable shares and allocate them to creditors—removing interest burdens and preserving fiscal space.”

He added that Iraq’s external liabilities are mostly concessional, offering favorable repayment terms. "Demonstrating repayment ability enhances Iraq’s financial credibility and appeal to global investors."

Still, he cautioned against aggressive borrowing, even if global benchmarks allow debt up to 60% of GDP. “Iraq must use its resources wisely to avoid transferring today’s debt onto future generations.”

The World Stage

Placing Iraq’s debt within a global context, economist Karim al-Hilu told Shafaq News that sovereign borrowing is common among advanced economies. “The United States carries over $36T in internal debt, while Germany owes €2T."

"Domestic liabilities, denominated in local currency, are easier to manage. In contrast, external debts come with interest obligations and may expose a country to geopolitical pressures," he explained.

Al-Hilu emphasized that reducing debt levels will unlock funds for essential development. “Iraq needs over 1,000 strategic projects in transport, energy, and food security. Debt reduction can rechannel spending into these areas.”

However, he warned that fiscal gains alone won’t resolve deeper governance problems. “Administrative inefficiencies, political quotas, and corruption continue to block execution of approved plans,” he observed.

Even well-structured federal policies often stall at the local level. “Some tenders and investment projects require bribes to proceed, and provincial actors frequently obstruct implementation for partisan gain,” al-Hilu concluded.

Looking Ahead

Beyond immediate fiscal metrics, Iraq’s long-term financial outlook hinges on institutional credibility and transparent execution.

 Analysts emphasize that without reliable reporting standards and predictable budgeting cycles, credit agencies and investors may hesitate to reclassify Iraq into more favorable risk categories despite falling debt levels.

Another critical factor is the development of local capital markets. Strengthening domestic bond markets, improving regulatory oversight, and expanding non-oil revenue streams could give Iraq additional tools to manage debt sustainably without overreliance on external aid or emergency lending.

Iraq’s ability to balance debt reduction with inclusive growth will shape its role in regional economic dynamics. As global capital flows shift amid tightening monetary policies, countries like Iraq must demonstrate not only solvency, but also vision, transforming fiscal gains into enduring national development.

Written and edited by Shafaq News staff.

TIDBIT FROM JEFF

 Jeff  

They've got to change the rate before the new budget amendments can get approved and implemented...they're preparing the budget to come forward, potentially at the start of August... 

It's very simple... We'll see on that.  We don't know that for a fact. 

 That's opinion.  But a lot of this has to do with accounting periods and the timing of the rate change. 

WALKINGSTICK: this will be all done by the end of the 2nd quarter!! #iraqidinar #iqd

 

Iraq emerges as third-largest Arab oil refiner

 Shafaq News – Baghdad

Iraq, OPEC’s second-largest oil producer, ranked third among Arab nations in refinery output for 2024, according to data from the Energy Research Unit (ERU).

The country boosted its refining capacity by 60,000 barrels per day (bpd) over the last year, reaching 988,000 bpd—up from 928,000 in 2023. 

Saudi Arabia maintained its lead in the Arab world, followed by Kuwait. After Iraq came the UAE, then Algeria, Egypt, and Qatar, while Libya ranked last.

At the global level, total refinery production rose by 807,000 bpd in 2024, reaching 93.631 million bpd—up from 92.823 million the year before.

TIDBIT FROM FRANK26

 Frank26 

 Article "Prime Minister's Advisor: Iraq is qualified to become a regional financial center with four strategic powers."  This is an insult.  

How dare you tell me Iraq is going to become the financial hub in the Middle East at 1310...Be...wise enough, astute enough...confident enough to know none of this is at 1310...You're smart enough, wise enough, savvy  enough, you know what these articles are doing. 

 They're telling you everything (Asraflak) about monetary reform without giving you a new exchange rate because if they give you a new exchange rate then they got to also give you the lower notes.  

Those 2 are as top secret as you can get. 

🧾 What’s the “$16 Agreement”?& GOLD PRICES IN IRAQ #iraqidinar #dinarrevaluation @DINARREVALUATION ​

 

US tariffs on Iraq raise economic questions

 US President Donald Trump has imposed a 30% tariff on Iraqi imports, a move expected to increase pressure on Iraq’s already fragile economy, an economic expert informed Shafaq News on Wednesday.

Nawar al-Saadi, professor of international economics, warned that the decision could have compounded effects on Iraq’s domestic market, cautioning that although exports to the United States are modest, the tariff will expose the deeper vulnerabilities in Iraq’s economic structure.

“Iraq lacks a diversified and resilient export base,” he said.

Al-Saadi added that such tariffs are rarely based on purely commercial considerations, linking the decision to Washington’s evaluation of Iraq’s trade compliance, regional positioning, and alignment on sanctions targeting Iran or Russia.

He further cautioned that the tariffs could signal a shift in broader trade relations, with potential consequences affecting not ties with the United States but also with other Western and regional partners.

To mitigate the fallout, al-Saadi urged a three-track response. He called on Baghdad to establish a direct diplomatic channel with Washington and to push for exemptions, reduced rates, or a delay in enforcement.

He also emphasized the need to expand trade partnerships, particularly with markets in China, India, Turkiye, and the Gulf. Achieving this, he noted, would require comprehensive industrial reforms and direct support for Iraqi producers to compete internationally.

Finally, Al-Saadi stressed that Iraq’s heavy reliance on oil leaves it exposed to global shocks and political volatility. “Diversification is no longer a long-term option—it’s an immediate national need,” he concluded, urging policymakers to reexamine Iraq’s economic model.