Iraq 2027 Budget Faces $58 Oil Assumption and Large Deficit

Iraq is preparing its 2027 budget with an assumption of $58 per barrel for oil, a price far below what the country needs to balance its finances. The draft budget anticipates crude exports of around 4 million barrels per day, including contributions from Kurdistan, with total spending projected at 217 trillion dinars ($166 billion). Despite these figures, lawmakers warn of a deficit exceeding 40 trillion dinars.

At the assumed export rate and oil price, Iraq would generate approximately $85 billion in annual crude export revenue before adjustments for discounts and transport costs. However, this falls short of the country's needs. The International Monetary Fund estimates Iraq's 2025 fiscal oil breakeven price at about $92.43 per barrel, highlighting the significant gap in the budget plan.

The government is also considering devaluing the Iraqi dinar to between 1,400 and 1,500 per U.S. dollar, up from the current 1,300. This move aims to boost the local-currency value of oil export revenues but would also increase the cost of imported goods. Oil remains the primary source of state revenue, making Iraq highly vulnerable to disruptions in production or exports.

This vulnerability was evident this year when the Iran war disrupted shipments through the Strait of Hormuz, forcing Iraq to redirect more barrels north through Turkey. The country is also exploring longer-term alternatives through Syria and Jordan. Additionally, Iraq aims to significantly expand its production capacity, targeting 8 million to 10 million barrels per day within six years.