Iraq faces ‘cash-flow’ strain, not bankruptcy

Shafaq News- Baghdad

Iraq’s financial situation reflects difficulties managing cash flows under exceptional uncertainty, rather than a lack of resources or risk of bankruptcy, Prime Minister Ali Al-Zaidi’s financial and economic adviser Mudher Mohammed Saleh told Shafaq News on Saturday.

Saleh stated that the government could continue paying salaries and meeting essential obligations if it managed its fiscal and monetary tools efficiently, but if the war continues into early next year and further affects oil exports, Baghdad may rely on domestic and external borrowing alongside reordered spending priorities.

Iraq’s foreign reserves are a “safeguard” for stable financial flows, he said, arguing that effective crisis management and faster economic reforms could preserve budget financing despite regional disruption.

The country relies heavily on crude exports to finance public spending, earning over $18 billion from the sale of 268.09 million barrels during the first half of 2026, according to the State Organization for Marketing of Oil (SOMO), less than the revenue reported for only four months of the same period last year. Shipping disruptions through the Strait of Hormuz sharply reduced exports from Iraq’s southern terminals, tightening government liquidity while salaries and other recurrent obligations continued to fall due.

Finance Minister Faleh Al-Sari said monthly payments to public employees, pensioners, and social-welfare recipients total about 7.8 trillion dinars ($5.95B). The ministry had disbursed around 3 trillion dinars ($2.29B) and held about 1.5 trillion dinars ($1.15B) in available liquidity, leaving an estimated funding gap of 3.3 trillion dinars ($2.52B).

The shortage has also affected essential services, with Health Minister Abdul Hussein Al-Mousawi saying salaries had become the government’s priority.

Read more: No exit but Hormuz: Iraq's economic vulnerability exposed