Iraq relies heavily on oil revenues, with oil accounting for 89% of government income. This dependence has made the country reliant on borrowing from abroad or domestically to cover the budget deficit caused by global oil price crises.
After the Council of Ministers approved the largest budget in Iraq for 2024, amounting to 221 trillion dinars, with a financial deficit exceeding 63 trillion, an S&P Global Commodity Insights survey conducted on June 10 revealed that Iraq increased its production by 40,000 barrels per day during May following OPEC’s decision to reduce cuts.
On April 1, the Ministry of Oil decided to voluntarily cut production by 211,000 barrels per day starting in May until the end of 2024. This decision, coordinated with some oil-producing countries, aimed to take precautionary measures to address the challenges facing the global oil market, balance supply and demand, and stabilize the market.
Nine OPEC members subject to quotas increased crude oil production by 100,000 barrels per day in May, driven by Nigeria and Iraq. This brought the group’s production 320,000 barrels per day above their collective targets, while bloc allies led by Russia reduced production.
Iraq increased its production by 40,000 barrels per day to reach 4.28 million barrels per day, exceeding its current target by 280,000 barrels per day, despite agreeing last May to compensate for excess production. Platts’ survey estimates current oil production in the Kurdistan region of Iraq at 210,000 barrels per day.
Iraq’s production reached 4.28 million barrels per day, up from 4.24 million barrels per day the previous month.
In March, Iraq’s revenues amounted to $7.404 billion from 100.913 million barrels, with an export rate of 3.255 million barrels per day at an average price of $73.37 per barrel.
For almost a year, European countries and the United States have been in conflict with Russia following its invasion of Ukraine. The resulting economic sanctions against Moscow included banning exports and excluding it from the global financial transfer system. In response, Russia halted its gas supply to Europe, causing a significant energy crisis on the continent.
Financial and economic researcher Nasser Al-Kinani stated in a previous report for “Al-Alem Al-Jadeed” that “Iraq relies entirely on oil sales for its budget revenues. Any drop in oil prices will significantly impact funding for both operational and investment budgets. Therefore, Iraq has taken this step to raise oil prices and provide sufficient funds to cover the budget deficit.”
Al-Kinani explained that “Iraq calculated the oil price in the budget at $70 per barrel. Any price above that will help cover the budget deficit and potentially provide surplus funds for future budgets.”
According to Prime Minister Mohammed Shia Al-Sudani, the 2024 budget is 211 trillion dinars, with 2024 employee salaries totaling 62 trillion dinars. The 2023 budget was 199 trillion dinars, with employee salaries at 59 trillion dinars.
Al-Sudani stated that the 2024 budget revenues are estimated at 144.336 trillion dinars, while expenditures are 210.936 trillion dinars, resulting in a deficit of 63.599 trillion dinars.
He also mentioned that the allocations for local government programs were 10.633 trillion dinars in 2023, with 3.333 trillion funded based on formal requests from the provinces. The remaining 7.333 trillion dinars are in escrow accounts under the disposal of provincial governments.
After taking office, Prime Minister Al-Sudani announced that Iraq would discuss with other OPEC members the possibility of reassessing and increasing its production quota, citing the need for funds to rebuild Iraq. He emphasized that Iraq is committed to stabilizing energy prices and does not want prices to rise above $100 or fall to levels that would affect the balance of supply and demand.
