The diversification of revenue streams in Iraq has historically been challenged by the dominance of oil and inadequate planning from successive governments. The reliance on oil revenues has left the government vulnerable to the uncertainties of global oil price fluctuations, especially in the context of declining agricultural and industrial sectors.
As Iraq’s population reaches 46 million, according to data from the Ministry of Planning, Manar Al-Ubaidi, head of the Future Iraq Foundation, which focuses on economic development and statistical analysis, reports that the annual population growth rate is approximately one million people. If current levels of oil production and pricing persist, Iraq’s poverty rate could soar to 84 percent.
Relying on oil as the sole source of public financing poses significant risks amid global economic crises, necessitating continuous borrowing, either domestically or externally, and highlighting the government’s inability to manage its financial resources effectively or to identify alternative funding solutions.
Al-Ubaidi elaborated on social challenges, stating, “The Ministry of Planning indicates that the poverty rate stands at 17.5 percent, which means that out of every 30 Iraqis, five exist below the poverty line.” He emphasizes that the real challenge facing Iraq extends beyond oil prices and geopolitical tensions; it is primarily a demographic issue.
He further noted that, given the current budget of 160 trillion dinars, which has proven insufficient to lower the poverty rate from 17 percent, achieving a level below 5 percent with a projected population of 70 million in 2040 would require an annual budget exceeding 300 trillion dinars. With expectations for oil prices around $50 per barrel by 2040, Iraq would need to significantly ramp up its exports—up to 12.5 million barrels per day—to generate sufficient revenue to meet these demands.
Continuing along the current trajectory without any adjustments in production or revenue streams could see poverty rates rise to 23 percent by 2030 and reach an alarming 84 percent by 2040 if oil prices decline and critical policy reforms remain unaddressed.
Al-Ubaidi cautioned that Iraq faces a demographic crisis that must be mitigated through awareness campaigns aimed at stabilizing population growth, boosting government revenues, and diversifying the economy. Without such measures, the country risks confronting severe societal challenges, including poverty, tribal unrest, famine, and increased crime akin to the crises faced by certain African nations.
These insights emerge amid heightened tensions over sanctions impacting Iraq’s energy imports from Iran. Chronic energy shortages have plagued the country for nearly a decade, particularly during summer months, triggering public discontent due to frequent power outages. Recent interruptions in Iranian gas supplies led to a loss of over 5,500 megawatts, exacerbating the energy deficit.
The prevailing economic crisis, coupled with the depreciation of the dinar against the dollar, has pushed the poverty line higher. Recent statistics highlight that southern governorates, particularly Al-Muthanna, experience poverty rates as high as 52 percent, with Al-Qadisiyah, Maysan, and Dhi Qar at 48 percent. In contrast, Baghdad’s poverty rate stands at 13 percent, while Nineveh reaches 34.5 percent, and central regions average around 18 percent.
Economist Hammam Al-Shamaa noted that, “Poverty in Iraq is increasing daily due to the depreciation of the dinar, rising prices, and declining employment opportunities. All individuals earning a fixed income below one million dinars per month are effectively becoming part of the impoverished demographic, unable to meet the living standards expected in previous decades.”
He argues that addressing corruption, which currently siphons off about a third of the nation’s wealth, consumes 50 percent of foreign currency resources, and stymies around 60 percent of investment prospects, must be a priority for effective economic revitalization.
Iraq ranks as the second-largest producer within OPEC, with oil revenues constituting approximately 90 percent of total state revenue. This heavy dependence leaves the economy particularly susceptible to fluctuations in global crude prices.
For fiscal year 2024, Iraq has proposed a budget that continues to increase despite the standard spending patterns of 2023, which saw the addition of over half a million public sector jobs and initial investments in infrastructure renewal. The 2024 budget forecasts an oil price of $70 per barrel—significantly above the anticipated price for the current year.
Looking ahead to September 2024, Mazhar Saleh indicated that Iraq anticipates a budgetary shortfall in 2025 due to declining oil prices, which serve as the primary revenue source for the nation.
The budgets for 2023, 2024, and 2025 are all predicated on the oil barrel price of $70, which currently exceeds its average market value. Iraq’s production share within OPEC allows for an export volume of approximately 3.5 million barrels per day, and total calculated revenues have reached 147 trillion dinars.
Additionally, BMI Research has revised its forecast for the 2024 Iraqi budget deficit from 3.3% to 7%, primarily reflecting weak projections for oil revenue, which constitutes a staggering 93% of total government earnings.
