Iraq's 2027 Budget Faces Large Deficit on Low Oil Price Assumptions

Iraq has drafted a 2027 budget based on a conservative oil price of $58 per barrel, significantly below the $92.43 needed to balance its books, according to the International Monetary Fund. The budget assumes crude exports of 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 4 million barrels per day and $58 per barrel, Iraq would generate roughly $85 billion in annual gross crude export revenue. However, this falls short of the country's fiscal needs. The draft budget highlights the country's heavy reliance on oil revenue, leaving it vulnerable to disruptions in production or exports.

To mitigate some of the financial strain, the Iraqi government is considering weakening the 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 dollars but would also increase the cost of imported goods. Additionally, Iraq plans to expand its oil production to 8 million to 10 million barrels per day within six years, further complicating its budgetary challenges.

The current budget draft underscores Iraq's precarious financial position. Without higher oil prices, increased production, or additional export routes, the country faces significant fiscal gaps that may require borrowing, spending cuts, or drawing down reserves to cover.