Plummeting oil exports cast shadow as Iraq drafts 2027 budget

ERBIL, Kurdistan Region - The Finance Ministry has begun preparing the 2027 annual budget, the Iraqi Parliament’s finance committee announced Friday, against the backdrop of plummeting oil exports which account for more than 85 percent of the country’s revenues.

"During the committee's visit to the Prime Minister, an agreement was reached on several issues, including the agreement to send the 2027 budget," committee member Ikhlas al-Dulaimi told the Iraqi News Agency (INA) on Friday.

"The Finance Committee has taken it upon itself to legislate the Grants and Borrowing Law; an agreement was reached with the government to approve it, and its first reading will take place next week," she said.

This comes amid mounting uncertainty over whether Iraqi oil exports, responsible for more than 85 percent of total government expenditures, including state payroll and public service sectors, will suffice to cover Iraq and the Kurdistan Region's expenditures.

Iraqi oil exports saw a sharp decline following the outbreak of the Iran war in late February, which disrupted shipping through the Strait of Hormuz - the route accounting for 90 percent of Iraq's oil exports.

At its lowest point, Iraqi oil exports fell to 18.6 million barrels in March, generating about $1.96 billion in revenue compared with more than 99 million barrels and $6.81 billion in February, according to figures from Baghdad's oil ministry.

Iraqi oil minister Bassim Khudair told reporters on Friday that "more than 85 percent of the [Iraqi annual] budget relies on exports," following his announcement that Iraq’s oil exports have rebounded to 2 million barrels per day (bpd) since the beginning of August.

Officials in Iraq are expected to finalize the annual expenditure framework for cabinet review by October ahead of the official parliamentary submission, following a year without a formal budget.

“The budget must reach the parliament by October 15” to be approved for the upcoming fiscal year in accordance with the Financial Management Law, the lawmaker clarified, adding, "We hope the crisis concerning promotions and bonuses will be resolved within this budget."

"There is an agreement between the prime minister and the finance committee to have a budget passed in the parliament as quickly as possible," Dulaimi added. "This is because the country's situation requires a budget to ensure financial stability, which determines the exchange rate, the price per barrel, export mechanisms, and operational procedures."

The commissioner explained that "the financial situation is difficult due to the halt in oil exports; therefore, we expect the state not to delve into these financial details at this time."

“The Ministry of Finance has directly started preparing the 2027 budget,” Dulaimi said, noting the development of “the budget strategy, involving the Finance Committee, several ministries, and representatives of the Region, before sending it to the committee."

Of note, the Iraqi premier advisor Mazhar Mohammed Saleh told Rudaw on Thursday that the satisfaction of the people of Kurdistan is integral to the satisfaction of Iraq.

He added that "the Region will have a major role" in the formulation of the 2027 budget, noting that coordination on oil, revenue, expenditures, customs and tax policy will remain a priority.