Iraq budget deficit triples to $16bn as oil revenues slump
Iraq’s budget deficit more than tripled in two months after disruption to oil exports through the Strait of Hormuz sharply cut government revenues.
The fiscal shortfall surged from $5 billion at the end of April to $16 billion at the end of June, according to finance ministry data.
Actual revenues were around ID36 trillion ($27.5 billion) in the first half of this year, while spending was nearly ID57 trillion, leaving a gap of ID21 trillion, Iraq’s finance ministry said in a report on Wednesday.
Oil revenues, which account for the bulk of Iraq’s national income, were nearly ID28 trillion in the first half of 2026.
That is down from $85 billion in 2025, when Iraq exported about 3.4 million barrels per day, according to the Kuwaiti-based Arab Energy Organization.
Iraq’s oil production has fallen to one of its lowest levels this year as a result of Iran’s closure of the Strait of Hormuz, through which all crude produced in Iraq’s south passes.
“If the regional situation does not improve, Iraq will end up with one of its largest budget deficits as it is difficult to reduce spending, most of which is allocated to salaries to public servants,” said Manar Al-Obaidi, manager of the think tank IraqFuture.
Iraq has resorted to borrowing, mainly from the local market, to fund its fiscal deficit in the absence of other major sources of income.
Heavy borrowing over the past few months boosted the country’s public domestic debt to an all-time high of ID103 trillion at the end of May, the central bank of Iraq said earlier this month.
Iraq, which controls the world’s fifth-largest proven oil deposits of around 145 billion barrels, has approved projects to build pipelines to Turkey and Syria to bypass Hormuz.