Iraq must rethink fiscal strategy to avert crisis, economist urges
Shafaq News – Baghdad
Iraq needs to overhaul its fiscal system to generate growth and jobs without widening its deficit, the Asul Foundation for Economic Development warned on Sunday, saying short-term monetary fixes “can no longer sustain” the economy.
Foundation Director Khalid al-Jabri told Shafaq News that Iraq’s financial framework remains “overly dependent on oil and imports,” leaving it exposed to price shocks and external disruptions. “We need real financial levers to move the economy from within,” he said. “Devaluation or asset re-pricing only postpones the crisis—they don’t solve it.”
Oil provides over 90% of Iraq’s state revenue, while the Finance Ministry recorded a 7.5-trillion-dinar ($5.2 billion) deficit in the first half of 2025. Al-Jabri urged the government to look beyond conventional borrowing and subsidies, proposing what he called a “modern fiscal model” centered on productive investment and private-sector partnership.
Read more: Iraq’s Oil Gamble: Budget on the brink amid global price collapse
He outlined a framework based on incentive bonds and public–private partnerships (PPPs) to channel idle capital into manufacturing, agriculture, and job creation. Under this system, the state would mobilize liquidity through markets rather than increase spending, using targeted tools such as local development or job-transition bonds backed by government guarantees.
Returns from these ventures—profits and tax revenues—would feed back into the treasury, creating a cycle of reinvestment rather than debt accumulation, al-Jabri explained. The model also envisions tax incentives and soft loans to encourage companies to hire graduates and integrate redundant public employees into the private sector.
“This stage requires innovation, not imitation,” al-Jabri said. “Iraq must build its own model—one that turns financial pressure into productive power.”
Read more: International warnings hit Baghdad: Money, oil, mismanagement
