Iraq aims to raise non-oil revenues to 45% economy

Confirm Mazhar Muhammad Saleh Financial Advisor to the Iraqi Prime Minister, An Iraq’s total public debt is still within the levels that can be managed according to international standards, indicating that the government is adopting a plan to raise the contribution of non-oil revenues to 45% of total public revenues during the next 10 years, as part of efforts to reduce dependence on oil and enhance financial stability.

Saleh said, in statements to the Iraqi News Agency (INA), that assessing public debt levels does not depend on the ratio of debt to public revenues alone, indicating that international institutions also look at the ratio of debt to gross domestic product, the cost of servicing debt, and the state’s ability to generate and sustain revenues.

He added that the largest portion of Iraqi debt is internal debt, while external debt has declined in recent years, explaining that the main challenge lies in public finances being heavily dependent on oil revenues, which makes them more vulnerable to price fluctuations in global markets.

Saleh explained that any decrease in oil prices raises the debt-to-revenue ratio and increases pressure on the general budget, even if the total public debt does not witness a significant increase.

He pointed out that the value of the external debt due until 2028 does not exceed about 9 billion dollars, while the total public debt, after adding internal debt, amounts to about 36% of the gross domestic product, a percentage that he said is still within the limits that can be managed, compared to the international standard, which exceeds 60%.

Saleh added that this percentage may decrease further if the settlement of the outstanding obligations within the Paris Club Agreement of 2004 is completed, which includes dues dating back to about 8 countries, including Gulf states, expecting that settling them will lead to the cancellation of no less than 80% of those obligations, according to the terms of the agreement.

$80 billion internal debt

Saleh pointed out that the internal debt exceeded 100 trillion dinars (about 80 billion dollars), stressing that its impact on Iraq’s financial independence remains limited as long as the external debt is within manageable levels.

On the other hand, Saleh warned that the continuation of the fiscal deficit and reliance on borrowing, especially if oil prices decline, may reduce the flexibility of financial policy and increase the need for reform and financing measures, indicating that the International Monetary Fund believes that the main challenge facing Iraq is not the size of the debt, but rather containing the financial deficit and diversifying sources of revenue.

He explained that the government aims to gradually raise the contribution of non-oil revenues from less than 10% currently to about 45% of total public revenues within 10 years, by improving tax and customs revenues, automating financial systems, expanding the tax base, stimulating the private sector and investment, in addition to reforming the banking sector.

Saleh stressed that these measures need time to be fully reflected in the financial reality, but they represent, according to him, “the most sustainable path to address the liquidity problem, reduce dependence on oil, and enhance the Iraqi economy’s ability to confront external shocks and achieve financial stability in the long term.”

He also pointed out that there are financial arrears owed to the private sector, including contractors, farmers, and others, approximately equivalent to the size of the internal debt, explaining that if they cannot be paid, they will be included among the internal debts to be settled in accordance with legal procedures.