Iraq faces pressure as oil prices continue to decline, creating serious challenges for the national budget. The government depends on crude exports for nearly all state income. Therefore, every drop in prices places additional stress on spending plans.
Brent crude now trades near 65 dollars per barrel. However, Iraq needs around 95 dollars per barrel to cover its budget. The wide gap forces officials to consider cuts in spending. If prices stay low, Iraq may delay or cancel major projects. This risk includes construction, infrastructure, and other investment plans.
The International Monetary Fund previously warned about this danger. It estimated Iraq’s fiscal break-even price at 84 dollars per barrel, among the highest in the region. At the same time, Iraq’s non-oil economy struggled to deliver growth. It contracted by nine percent one year, and forecasts showed growth of less than one percent the next. These figures confirm the fragile state of the economy.
Iraq faces pressure from both falling crude income and weak non-oil sectors. Together, these challenges leave little room for financial stability. Economists argue that Iraq must diversify more quickly. The economy requires stronger agriculture, manufacturing, and service industries. Without such changes, the country will continue to rely almost entirely on oil.
Analysts also highlight broader risks. Fiscal stress often fuels unrest and weakens political stability. When governments cannot meet public demands, social tensions increase. For Iraq, which already manages complex political divisions, this threat is particularly serious.
Despite the risks, opportunities remain. Non-oil exports can grow with better policies. Refined product sales already show some promise. In addition, investments in technology and trade could bring more balance to the economy. Iraq faces pressure, but it can reduce vulnerability through reform.
The government now stands at a crossroads. Leaders must decide whether to continue heavy oil reliance or speed up diversification. This decision will shape Iraq’s financial and political future.