Internal Debt in Iraq Sees Significant Surge
Economist Manar Al-Ubaidi has raised concerns over the substantial rise in Iraq’s internal debt, which surged by 13 trillion Iraqi dinars in just a year—equating to 4% of the country’s gross domestic product (GDP).
Al-Ubaidi highlighted that this year’s increase markedly eclipses the cumulative rise of 6 trillion dinars recorded over the previous four years (2020 to 2023), which represented only 2% of GDP.
Notably, this sharp increase occurred during a period marked by rising oil prices in 2024, a factor that typically would mitigate the need for internal borrowing. However, persistent borrowing has elevated the debt-to-GDP ratio to 25%. Although this level remains within economically manageable limits, it portends potential long-term risks.
Al-Ubaidi cautioned that if the current borrowing trajectory continues, coupled with a potential decline in oil prices, the debt ratio could exceed 60% of GDP—a threshold that could negatively impact Iraq’s credit rating and diminish its future borrowing capabilities.
He emphasized that the critical issue lies not only in the magnitude of the debt but also in its utilization; a significant portion of these funds is directed towards operational expenditures rather than productive investment projects. Al-Ubaidi argued that operational spending does not contribute to the enhancement of national economic value or local production, thereby complicating debt repayment and increasing financial pressure on the state.
The annual increase of 13 trillion dinars reflects more than just a numerical statistic; it serves as a clarion call for a reassessment of governmental expenditure strategies. Al-Ubaidi advocated for a reallocation of resources towards investment initiatives designed to strengthen the national economy and boost GDP, rather than perpetuating the trend of increasing operational expenditures.
He further identified excessive public expenditure as a primary challenge, necessitating a more judicious approach to spending and strategic direction. Without immediate action to curb spending, Iraq risks confronting unprecedented levels of debt, potentially leading to a severe economic crisis.
To effectively tackle the issue of internal debt, Al-Ubaidi asserted the need for robust political will and sustainable economic planning. He warned that the continuation of the current trajectory could exacerbate the country’s financial predicament, making it imperative to implement comprehensive reforms.
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