Key facts
- Iraq's 2027 budget is based on an oil price assumption of $58 per barrel.
- The budget projects crude exports of around 4 million barrels per day.
- Total projected spending is 217 trillion dinars ($166 billion).
- Lawmakers estimate a deficit of more than 40 trillion dinars.
- Iraq's fiscal oil breakeven price for 2025 was estimated at $92.43 by the IMF.
- The government may devalue the dinar to 1,400-1,500 per U.S. dollar.
Iraq is constructing its 2027 budget with an assumed oil price of $58 per barrel, a figure significantly below the level required to balance its finances. The draft budget anticipates crude exports of approximately 4 million barrels per day, including those from Kurdistan, with total spending set at 217 trillion dinars, or about $166 billion.
Even with these assumptions, lawmakers estimate the budget would face a deficit exceeding 40 trillion dinars. At 4 million barrels per day and $58 per barrel, Iraq's gross crude export revenue before adjustments would be around $85 billion annually. This is insufficient to cover projected expenditures, especially when compared to the International Monetary Fund's estimate of Iraq's 2025 fiscal oil breakeven price at approximately $92.43 per barrel.
If crude oil averages $58 next year, Iraq would need to finance the deficit through borrowing, spending cuts, or drawing down reserves. The government is also considering devaluing the dinar to a range of 1,400 to 1,500 per U.S. dollar, from its current level of around 1,300. This devaluation would increase the dinar value of dollar-denominated oil export revenues but would also make imports more expensive.
Oil remains the primary source of Iraqi state revenue, making the country highly vulnerable to disruptions in production or exports. Recent events, such as the Iran war impacting shipments through the Strait of Hormuz, have highlighted this vulnerability, forcing Iraq to reroute exports and seek alternative routes. Iraq aims to significantly increase its production to 8 million to 10 million barrels per day within six years, presenting a challenge for future budgets that require higher oil prices and expanded export capacity to fund its spending trajectory.