High oil revenues have translated into substantially higher spending across sectors

Iraq’s parliament has approved the long awaited 2023 budget, with record spending on a public wage bill and critical infrastructure development

Iraq, with its growing population and substantial oil revenues, presents an important emerging opportunity for companies in their MENA portfolio. While it holds significant potential, the country’s complex operating environment is the main challenge causing MNCs to keep a distance and work opportunistically with local partners. Despite this, using targeted strategies can help MNCs capture Iraq’s niche opportunity.

  • Work with local partners to help guide and align on prices of local contracts to manage the dollar ban that has been implemented on commercial and business transactions.
  • Expect demand disruptions to grow throughout H2 2023, particularly in Q4 2023 as Iraq hosts provincial elections. Ensure your local partners are protected against operational risk and route-to-market disruptions. Work with partners to potentially stock larger inventories in areas that could become hard to access to get ahead of supply disruptions.
  • B2B firms should work with local teams and channel partners to identify the exact areas and projects where spending is being directed and ensure that you are adjusting your offering to any government priorities (particularly infrastructure) that will make you more likely to win the spending.
  • B2C firms should ensure they are able to capture additional demand by tailoring your offering or by understanding how you can tap into high-income consumer segments that are seeing growth, particularly as the growing public sector employs a substantial number of high-income consumers, and rising investment leads to a (gradual) increase salaries and/or hiring.
  • Identifying the right products in your portfolio to capture the higher-income consumer base and to respond to emerging local trends.
  • Align on timelines of when public projects will materialize, preparing your supply chain or product quota assumptions accordingly.
  • Build a long-term growth strategy for Iraq that lays out a gradual ROI.
  • Align with partners on your long-term strategy and deepen customer insight collection, marketing efforts in order to build brand visibility, and after-sales support to retain customer loyalty and create a foundation for growth.


  • Following months of political wrangling, Iraq’s parliament has approved the budget bill, setting spending at a record US$ 153 billion. The budget is valid through 2025, and is subject to amendments, accounting for changes in global oil prices. 
  • Revenues are set to reach US$ 103 billion in 2023, based on 3.5 million barrels per day of oil exports with an oil price assumption of US$ 70 per barrel.
  • Public spending has increased across all sectors, including more than 50% YOY on social services, more than 200% YOY on health, and 100% YOY on energy. 
  • The budget sees CAPEX and OPEX increase by 86% and 60%, respectively, with salaries increasing 10.2%. 
  • The budget also includes sizable spending on development and infrastructure projects, such as the Sinjar and Nineveh Plain reconstruction fund of US$ 38 million, as well as the US$ 381 million allocated to a reconstruction fund dedicated to improving services, such as education, infrastructure, and healthcare access.
  • The bill will also expand Iraq’s growing public sector, planning to add tens of thousands of full-time and temporary staff and contractors, thereby increasing public wage spending, including salaries and pensions, by US$ 58 billion.

Our View

Iraq’s budget leaves its economy vulnerable to the volatile oil market—nearly all state revenue is from oil sales, and the budget is based on an ambitious oil price of US$ 70 a barrel. A growing public sector is unsurprising, as salaries now constitute more than a quarter of the 2023 budget, and this trend will likely continue in 2024 as a mechanism to maintain patronage networks. Subsequently, this should ensure minimal disruptions to public sector salary payments and allow for stability in government payments to suppliers and contractors. Alongside this, regional dynamics have paved the way for higher Gulf investments into Iraq, as is evident by recent Saudi and UAE pledges to invest more than US$ 6 billion into investment projects in Iraq, and Qatari companies partnering with Iraq on US$ 9.5 billion worth of projects. Civil unrest remains a risk in Iraq, particularly during the summer months when water and electricity shortages become more acute. Alongside this, the risk of protests is significantly higher in December 2023, when the country will see provincial elections, to be held under the controversial Sainte-Laguë electoral system. Iraq’s challenging operational environment will continue to pose risks to growth in new investments and overall consumer sentiment.

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