The budget entails higher total spending across sectors
Iraq’s parliament’s approval of the 2024 budget in June signals public spending continuity following years of inconsistent spending patterns, and will allow for a more stable operating environment for multinationals. Notably, figures are based on an oil price assumption of USD 80 per barrel. The budget outlines an increase in total expenditures, alongside a notable rise in non-oil revenues- which should provide ongoing opportunities in sectors beyond oil and gas – and a modest uptick in projected oil revenues. Firms should be mindful that the realization of said opportunities will hinge on the government’s ability to attract and secure the necessary non-oil investments and projects. Should progress in these areas remain sluggish, revenue projections may fall short, underscoring the importance of strategic partnerships to capitalize on emerging opportunities in Iraq.
Business Implications:
Businesses will find growing opportunities in Iraq next year as project spending, particularly in energy, healthcare, and infrastructure increases. The continuity in public sector salary disbursements is likely to boost consumer spending, as higher disposable income drives demand for FMCG and non-durable goods. Despite this, firms should be mindful of high operational costs into 2025, driven by import regulations as the government implements various tariffs on items such as construction goods , as well as currency depreciation, with limited ability to bridge the gap between the dinar’s official and parallel rate- which will continue to trade above 1400 to the dollar.
What are the details of the budget?
The total expenditures are set at IQD 212 trillion, a 6.1% YOY increase from 2023’s IQD 199 trillion, with a substantially larger deficit than last year’s budget – around IQD 64 trillion. Notably, non-oil revenues are set at IQD 27.3 trillion, a significant increase from IQD 17.3 trillion in 2023. Official sources have stated that the government is planning to allocate nearly USD 42 billion for projects, covering several sectors including housing and services- and will likely entail the development of new healthcare infrastructure and crucial housing projects. Notably, spending on non-oil sectors (including healthcare) will see a drop in spending should oil revenue projections fall short of expectations. Spending on energy will cover the enhancement of existing oil infrastructure alongside new capacity projects. Around IQD 2.7 trillion of investment funds allocated for the Kurdistan region are dependent on the resumption of the region’s oil exports – although this remains highly unlikely in 2024.
At FrontierView, our mission is to help our clients grow and win in their most important markets. We are excited to share that FiscalNote, a leading technology provider of global policy and market intelligence has acquired FrontierView. We will continue to cover issues and topics driving growth in your business, while fully leveraging FiscalNote’s portfolio within the global risk, ESG, and geopolitical advisory product suite.
Subscribe to our weekly newsletter The Lens published by our Global Economics and Scenarios team which highlights high-impact developments and trends for business professionals. For full access to our offerings, start your free trial today and download our complimentary mobile app, available on iOS and Android.