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Iraq intends to devise a three-pronged emergency fiscal plan based on borrowing and maximising non-oil revenues to tackle a severe cash crisis caused by Iran’s closure of Hormuz Strait through which most of Iraq’s crude exports pass.
The plan aims to secure funds for new projects and those under construction and to ensure that public servant wages are not interrupted.
Both domestic and foreign borrowing have negative effects on the government of new prime minister Ali Al-Zaidi but they could be ideal options to tackle the crisis, said Mudhar Saleh, a financial adviser to Zaidi.
Quoted by the official Iraqi News Agency (INA), Saleh said Iraq is facing a monthly financial gap of around $9.5 billion due to the half of most of its oil exports to global markets, referring to the difference between revenue and spending.
“The Ministry of Finance is preparing a three-pronged emergency plan that includes domestic and external borrowing, in addition to measures to maximise non-oil revenues through taxes, fees, and financial reforms,” Saleh said.
He noted that domestic borrowing offers a quick solution to cover public servant salaries and operational obligations by the government, but that it could drain liquidity from banks, increase the cost of domestic financing, and weaken private sector financing.
External borrowing provides dollar liquidity and maintains relative monetary stability, but it is tied to reform conditions and increases the debt service burden, he said.
“Maximising non-oil revenues is the most strategic option in the medium and long term, through controlling border crossings and customs, automating the tax system and improving tax collection without harming economic activity,” Saleh said.
“The current crisis represents a real test for the structure of the Iraqi economy, which is dependent on oil…accelerating financial and banking reforms and diversifying the economy will enhance Iraq’s ability to keep projects on track and withstand geopolitical and economic shocks."
Iraq, OPEC’s second largest oil producer, is currently producing far below its actual output capacity due to Hormuz blockage.
During the first four months of 2026, Iraq’s total oil exports stood at around 236 million barrels (1.9 million barrels per day ), fetching about $16 billion, according to the State Oil Marketing Organisation (SOMO).
SOMO said in a report this week that around 213 million barrels were exported during that period from South Iraq and the rest from the North via the Kirkuk pipeline.
The report showed Iraq’s oil exports in the first four months of this year were nearly 58 percent of the exports of about 406 million barrels during the same period of 2025.
Iraq, which controls the world’s fifth largest proven oil deposits, is already saddled with heavy domestic public debt of more than $70 billion, according to the central bank.
“Iraq needs to restructure its economy which has been heavily reliant on oil for a long time…new sources of income will help the country fund projects and reduce debt as the bulk of the oil revenues are sapped by salaries to public servants,” said Nabil Al-Marsoomi, an economics professor at Basra University.
(Writing by N Saeed; Editing by Anoop Menon)
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