Iraq’s financial advisor to the Prime Minister, Mazhar Mohammed Salih, has confirmed that the Ministry of Finance has started working on the 2026 national budget. He explained that the government is considering two possible approaches depending on oil prices and financial conditions.
Salih said in a press statement that the first plan would continue the current expansionary policy, meaning more spending on investment projects and government jobs to keep the economy active.
But there’s a catch — this could increase the budget deficit and put extra pressure on Iraq’s finances. If spending continues to grow, the government might need to borrow more money, either from local banks (which could affect liquidity) or from foreign sources, though that’s less likely. More borrowing could raise Iraq’s debt levels and limit financial flexibility in the future.
He also noted that this plan assumes an oil price of $70 per barrel, which depends on global market conditions and political stability — both of which can change quickly. “That makes this scenario risky,” he said.
The second scenario is more conservative, based on an oil price of $60 per barrel. Salih said this approach focuses on fiscal discipline and long-term sustainability. It would mean tighter spending, focusing only on key priorities, while pushing the government to expand non-oil revenues through better tax collection and economic reforms.
While this cautious plan could slow down growth a bit in the short term, Salih believes it would strengthen Iraq’s financial stability and give the government more flexibility to handle future shocks. He added that the impact could be balanced through stronger partnerships with the private sector and foreign investors.
In both cases, Salih emphasized that diversifying Iraq’s income sources and developing non-oil sectors are essential. These steps, he said, are the only way to reduce the deficit, stabilize the economy, and protect Iraq’s finances in the long run.
The government plans to keep the hypothetical deficit around 64 trillion dinars under both scenarios, as a safety measure while it finalizes the 2026 budget framework.
