ERBIL, Kurdistan Region - Iraq recorded a budget deficit of 339 billion dinars (nearly $260 million) in January, according to a finance ministry report released Sunday, marking a shortfall before the outbreak of the Iran war and the closure of the Strait of Hormuz, which carries a vast majority of Iraq’s oil exports and revenues.
The report showed total expenditures at 8.87 trillion dinars, while revenues reached 8.53 trillion dinars, resulting in a deficit of 339 billion dinars in the first month of the year.
This is not the first time that Iraq has begun the year with a deficit in the last two decades. However, the shortfall has decreased threefold compared to, for instance, January 2025, when it stood at 1.03 trillion dinars.
The lower deficit compared to last year may also reflect fiscal paralysis, as starting the year without an approved budget law limits spending to a 1/12 basis of the previous year’s budget, largely covering salaries and essential operating costs while new investment projects remain frozen.
The absence of a budget law has contributed to recurring monthly deficits. Iraq’s three-year budget framework expired at the end of 2025, and since November’s parliamentary elections, the country has yet to form a new Council of Ministers, a prerequisite for passing a new budget.
Spending breakdowns indicate that 8.34 trillion dinars were allocated to operating expenses, while 530 billion dinars went toward investment.
Of the operating costs, 5.08 trillion dinars were spent on salaries and 2.11 trillion dinars on pensions, social welfare, and grants. In total, 7.13 trillion dinars were spent on salaries and social support in January alone, including 769 billion dinars for Kurdistan Region employees and 257 billion dinars for pensions and social welfare in the Region.
Oil revenues accounted for 7.07 trillion dinars, while non-oil revenues totaled 1.46 trillion dinars. The report noted that 120 billion dinars of non-oil revenue came from the Kurdistan Region.
Looking forward, the situation is further complicated by Iran’s closure of the Strait of Hormuz since March 8, in response to the United States and Israel’s military campaign against it, significantly affecting Iraq’s oil exports, as around 90 percent of the country’s exports typically pass through the waterway.
The January shortfall comes as Iraq’s Supreme Financial Council has held several meetings in late 2025, aimed at increasing revenues and reducing expenditures. Measures discussed include cutting high-ranking bonuses, unifying the border crossing system, and expanding digitalization.
In 2025, Iraq recorded total revenues of 124.18 trillion dinars against expenditures of 141.22 trillion dinars, resulting in an overall deficit of 17.04 trillion dinars.
