Tishwash: The exchange rate dilemma: Government alternatives between deficit financing and economic stability
By Dr. Ahmed Hadhhal, Professor of Financial Economics
In light of the financial indicators for the 2026 budget, it appears that the exchange rate will be the focus of economic decision-making and the last line of defense against the widening deficit gap, which is expected to reach 70–90 trillion dinars.
With the slowdown in non-oil revenues, the rise in current expenditures, and the decline in the ability to borrow domestically, fiscal policy enters a critical area that leaves the government with limited and difficult options.
The first logical solution is to rationalize spending and reduce non-salary operating expenses, and to control non-oil revenues through a strict automation and collection system, as well as reforming the state’s financial management and reducing the spread of administrative and financial corruption.
This can significantly reduce the deficit. Reducing privileges and imposing mandatory savings on senior officials can add a large amount to public finances, in addition to this measure being a gesture of goodwill to society so that it accepts the high costs of reform.
Selling or investing part of the state’s assets may provide between 10-15 trillion dinars, an amount that covers only a limited part of the gap. Even when these measures are applied together, the deficit remains high and cannot be fully financed through domestic borrowing without risking a large jump in domestic debt. Therefore, reform must be real through a structural “surgical operation” on spending and revenue items.
The exchange rate appears to be a short-term option, as the government recognizes that the resources generated by raising the exchange rate are the fastest and most effective way to bridge the financing gap.
Trends and potential scenarios indicate that raising the rate from 1300 to 1500-2000 dinars would provide between 15 and 70 trillion dinars, depending on the level of the increase and the volume of dollar sales.
This makes adjusting the exchange rate a readily available financial tool that the state resorts to when traditional methods fail to close the gap.
I believe this policy represents a price the economy pays for maintaining the current monetary policy throughout the period of pegging.
Therefore, the government might consider integrating financing tools instead of relying on a single option:
1- A genuine reduction in operating expenses by 15-20%.
2- Reform of the spending system and financial oversight to ensure that artificial inflation in expenditures is not repeated.
3- Selling and investing specific highly liquid assets to secure quick resources.
A gradual and well-considered adjustment of the exchange rate towards 1500-1700 dinars as a starting point is advisable, with the risk of reaching 2000 if oil revenues do not improve.
Combining these tools together reduces the deficit pressure to limits that can be financed internally, and the central bank may pay for this adjustment through its reserves, given that most government spending is directed towards consumption and is considered a tool for effective aggregate demand directed towards imports financed and covered by the exchange rate.
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Tishwash: United States to inaugurate its largest Middle East diplomatic facility in Iraq’s Erbil
Deputy Secretary of State for Management and Resources Michael Rigas will visit Erbil to inaugurate the new US Consulate General during his Middle East tour.
The United States will soon open its largest diplomatic facility in the Middle East, the new Consulate General in Erbil, the capital city of the Iraqi Kurdistan region, according to the US State Department.
Deputy Secretary of State for Management and Resources Michael Rigas will visit Erbil to inaugurate the new US Consulate General during his Middle East tour from 27 November to 5 December, the State Department said in a statement on Tuesday.
The department stated that Rigas will also visit Baghdad, meet with Iraqi officials, and tour US diplomatic facilities.
The department added that Rigas’s itinerary includes stops in Istanbul, Baghdad, Erbil, and Jerusalem. The purpose of his travel is to emphasise US commitments to stability, security, religious freedom, and prosperity in the region.
Kurdistan Regional Government (KRG) Prime Minister Masrour Barzani stated on Wednesday that the opening of the largest US consulate in Erbil is “a major indicator… for the strong relations between the United States and the Kurdistan Region.”
The current US Consulate General, located in Erbil’s Ankawa suburb, has been targeted several times by drones reportedly launched by pro-Iran militias in Iraq.
In June 2025, amid escalating tensions between Israel and Iran, the United States ordered non-emergency government personnel to leave its diplomatic missions in Iraq, while maintaining essential embassy and consulate operations.
According to the official website of the US embassy in Iraq, the Consulate General in Erbil serves the four provinces of the Kurdistan Region: Erbil, Sulaimaniyah, Duhok, and Halabja. It includes an executive office led by the Consul General, as well as sections for political and economic affairs, public diplomacy, consular services, rule of law, management, and security. The USAID office for the Iraqi Kurdistan Region is also located at the Consulate General. link
Tishwash: Income gap: Iraq lags behind oil-producing countries despite its enormous wealth
The income gap reveals that the per capita share of Iraq does not exceed $5,800, while Qatar and Oman shockingly surpass it, reflecting the failure of oil wealth management to improve the standard of living.
The latest data from the International Monetary Fund reveals an unprecedented gap in income levels within the Arab world. The figures show that the richest Gulf state (Qatar) is ahead of Iraq by more than 1100% in per capita GDP, while the poorest Gulf state (Oman) is ahead of it by 230%. This shockingly shows that Iraqis are effectively living outside the club of oil-producing countries, despite the enormous wealth that their country possesses.
Qatar tops the list with $71,400 per person annually, while Iraq stands at only $5,800, a very low position compared to oil-producing countries, revealing a deep flaw in the conversion of natural resources into economic prosperity.
Iraq is out of the oil club.
According to the index, even economically unstable countries like Libya ($6,900) and Algeria ($6,100) outperform Iraq.
Oman (the poorest of the Gulf countries in terms of income) is also ahead of it by more than three times, with a share of $19,100 per person.
In contrast, Iraq only surpasses countries with limited resources such as Jordan, Morocco, Tunisia, and Egypt, which places it in the category of a “middle-income economy” despite its enormous oil and human potential. Iraq possesses:
One of the world’s largest oil reserves
Annual revenues exceeding $100 billion
A huge young and productive workforce
However, the per capita share does not reflect this wealth, indicating a clear imbalance in resource management, weak productivity, and the dominance of unproductive activities.
Three clear economic messages…
1. The failure to utilize oil revenues for the welfare of the citizen, due to the almost complete dependence on rent.
2. The dominance of the public sector and the inflation of operating expenses at the expense of investment.
3. The absence of a diversified economy capable of creating added value and real income for the individual.
What does this mean for the Iraqi citizen?
Thus, Iraq’s ranking reveals that economic growth does not reach the lives of citizens , and that the standard of living does not represent the true wealth of the country. It also places the next government before the responsibility of restructuring the economy and transforming natural wealth into actual development (if it has the ability and will to do so). link
