What does the Iraqi economy need to reform? An analytical look at the current situation and potential paths to correction.

For many years, the Iraqi economy has suffered from a clear paradox: possessing substantial financial resources, yet lacking the capacity to translate these resources into genuine and sustainable development. The relative financial stability Iraq enjoys today does not necessarily reflect a sound economic structure; rather, it masks accumulated structural imbalances stemming from excessive dependence on oil, an inflated role for the state, and weak economic and administrative institutions. Therefore, any serious discussion of reforming the Iraqi economy must begin with a realistic diagnosis of these imbalances before proceeding to prescribe reform measures.

Successive governments have managed short-term stability through increased public spending, benefiting from oil revenues and high foreign currency reserves. However, this approach has created a fragile economy more dependent on oil price shocks than on production. Public budgets have ballooned since 2004, not as a result of growth in the productive base, but due to expanding operating expenses, particularly salaries and subsidies, making the state the largest employer and source of income in the country. This reality has placed a constant burden on public finances and limited the government’s ability to direct resources toward long-term investment and development.

The bloated public sector and the multiplicity of laws governing salaries and benefits have created profound distortions in the income structure and undermined the principles of fairness and efficiency. The economy cannot become productive as long as government employment remains a substitute for genuine job opportunities in the private sector. Therefore, reforming the salary scale and linking wages to productivity, along with redefining the state’s role from direct employer to regulator and supporter, represents a fundamental step in the reform process.

At the same time, the social support system reflects another form of structural dysfunction. While socially important, the comprehensive nature of the support has led to significant resource waste and reduced the effectiveness of social protection. Reform here does not mean reducing support as much as it means redirecting it towards the most vulnerable groups and linking it to genuine economic empowerment policies that create opportunities for work and production instead of perpetual reliance on subsidies.

The energy sector represents one of the most significant structural challenges draining public finances and hindering growth. Massive spending on electricity has failed to provide a stable service due to deficiencies in management, governance, and revenue collection. The continued flaring of associated gas is a glaring example of resource mismanagement, costing Iraq billions of dollars annually that could have been used to generate energy, income, and employment. Genuine reform in this sector requires a comprehensive restructuring, not partial or temporary solutions.

Regarding public debt and fiscal deficits, the problem lies not in their existence itself, but in how they are used. Borrowing to finance operational spending exacerbates the crisis, while debt can be a positive tool if directed towards productive projects with clear returns. Hence, the need arises for a medium- and long-term fiscal framework that links deficits to growth and prevents imposing unfair inflationary or tax burdens on citizens.

Despite this, Iraq possesses significant strengths, most notably monetary stability, high foreign reserves, and low inflation. However, these indicators will remain limited in their impact unless they translate into genuine growth in the real economy. This requires a fundamental reform of the banking sector, enabling it to finance investment and production, rather than simply acting as a conduit for liquidity.

The weakness of non-oil revenues also reveals the depth of the institutional crisis. The absence of effective governance, complex procedures, and the prevalence of the informal economy all limit the state’s ability to collect revenue fairly and efficiently. Institutional reform is no less important than fiscal reform, as it provides the framework within which economic policies are implemented.

Ultimately, no economic reform in Iraq can succeed without a strong and effective private sector. The state can no longer continue to be the sole engine of the economy. What is needed is a stable business environment that protects investors, reduces bureaucracy, and provides clear and fair rules for competition. A competent private sector is not a replacement for the state, but rather an essential partner in achieving development.

The Iraqi economy stands at a pivotal moment. It must either leverage its current financial stability to launch genuine structural reforms that rebuild the economy on a foundation of production and diversification, or continue its reliance on oil and public spending, with all the future risks that entails. Reform is not merely a political choice, but an economic imperative to guarantee stability and development for future generations.

Economic Unit / North America Office,

Rawabetcenter.com

Border Ports Authority: Ports are undergoing a digital transformation after the introduction of modern technologies and the networking of sonar systems.

The head of the Border Ports Authority, Omar Adnan Al-Waili, confirmed today, Thursday, that the ports are witnessing a digital transformation after the introduction of modern technologies and the networking of sonars. A statement from the Authority stated that “the head of the Border Ports Authority, Omar Adnan Al-Waili, received today an official delegation from the International Trade Centre of the United Nations, coming from Switzerland, headed by Pierre Bonthoneau, Director of the Trade and Investment Facilitation Department, the Director of Trade Facilitation and Digital Transformation Programs, and a Trade Policy Advisor, with the aim of strengthening cooperation and facilitating international trade.”

The head of the authority also gave a detailed explanation of the authority’s work and efforts to maximize non-oil revenues and combat smuggling in all its forms, stressing that the authority is undergoing a broad digital transformation through the introduction of modern technologies, data exchange between relevant working entities, networking of sonars at all border crossings, and activation of cross-border trade according to the TIR system, with direct follow-up and supervision from the Prime Minister.

Al-Waeli stressed “the continuation of hard work to enhance security and stability at border crossings, which will positively impact the increase in trade exchange in Iraq and facilitate international trade.”

In turn, the delegation members praised the Authority’s actions in the field of governance and electronic oversight, and expressed their admiration for its efforts in combating smuggling and rebuilding border crossings, stressing their readiness to provide technical and training support to improve the Authority’s technical capabilities.

He also noted that “this visit reflects the International Trade Centre’s interest in strengthening cooperation with the Border Ports Authority with the aim of raising work efficiency and promoting stability and economic development.”

Burathanews.com

Trump envoy and Joe Wilson: We will make Iraq great again

Washington – Mark Savaya, President Donald Trump’s envoy, wrote on the “X” platform (formerly Twitter) on Thursday that he met with US Congressman Joe Wilson and it was a “great meeting.”

“It was a great meeting with U.S. Congressman Joe Wilson and his team,” Savaya said in his post, adding, “We will make Iraq great again.”

For his part, Republican US Representative Joe Wilson wrote on the “X” platform that he was pleased to host Mark Savaya, the US Special Envoy to Iraq, in his office for a meeting he described as important regarding Iraq.

Wilson, who is known for raising controversial issues and making provocative statements, particularly regarding Iraq and the Middle East, added: “I look forward to working with the Special Envoy to bring prosperity to Iraq and liberate it from Iran,” noting that “there is no one more qualified than him to work on this issue for President Trump.”

US Representative Joe Wilson posted a picture of himself with Trump’s envoy, holding the Iraqi flag, with the American flag behind them and the new Syrian flag beside it.

Shafaq.com

Sudani directs a comprehensive evaluation and restructuring of tax administration systems in Iraq

On Thursday, outgoing Prime Minister Mohammed Shia al-Sudani directed that a comprehensive evaluation and restructuring of all tax administration systems in Iraq, including their specific policies, be carried out.

This came during his chairmanship of a special meeting to follow up on the implementation of the comprehensive tax system governance, in the presence of senior staff of the General Authority for Taxes and relevant institutions, and representatives of the consulting firm “Oliver Wyman”, according to a statement issued by the Sudanese Media Office.

The statement said that the meeting reviewed previous efforts to follow up on the comprehensive development of the tax administration sector through reform steps, most notably attracting specialized international companies to work on the integrated automation of tax departments, and a detailed presentation was given to these companies.

Al-Sudani also directed the Supreme Committee for Tax Reform to study the Oliver Wyman program in planning and implementation and to submit a detailed report on it, as this program included an integrated work methodology for reforming and developing tax administration, as a fundamental and pivotal pillar for increasing sustainable government revenues, in order to reach a tax administration that is characterized by transparency and fairness, and contributes to raising Iraq’s financial and investment ranking.

According to the statement, the meeting reviewed a number of similar experiences in Arab countries, the extent of development that has occurred in their work, and the amount of tax increases achieved during the first year of implementation.

Iraq had the highest income tax rate among Arab countries for the year 2024, according to infoflix.

Recent economic data seen by Shafaq News Agency shows that Mauritania topped the list of Arab countries in terms of the highest income tax rates for 2024 at 40%, followed by Morocco at 38%, then Algeria and Tunisia at 35% each.

Egypt came in fifth place with 26%, followed by Lebanon with 25%, followed by Syria in seventh place with 22%, while Jordan came in eighth place with 20%.

Iraq and Sudan came in last place with 15% each, reflecting a clear disparity in tax policies among Arab countries.

Economic experts believe that the decline in the income tax rate in Iraq is due to ongoing efforts to attract investments and stimulate the private sector, in light of the economic challenges facing the country, especially the heavy reliance on oil revenues.

The tax system in Iraq also continues to face difficulties in implementation and modernization, which affects the state’s ability to maximize non-oil revenues.

At the end of August, Al-Sudani confirmed that Iraq faces a major economic challenge, namely the priority of reform and the transition to a diversified economy, noting that the size of public spending in each fiscal year amounts to about 150 trillion dinars, compared to tax revenues that do not exceed 3 trillion.

In a speech during the tax conference for economic development and revitalizing the investment environment held in Baghdad, Al-Sudani said, “The general budget amounts to about 150 trillion dinars annually, compared to tax revenues that do not exceed 3 trillion, and these figures need to be examined and reviewed.”

He added that “reform decisions in the economic field were previously exploited within the framework of slogans and pressure on official institutions,” noting that “the government sponsored the tax system reform conference in December 2023, which came out with a package of important recommendations.”

He explained that “Cabinet Resolution (24074 of 2024) put the tax reform packages into effect, followed by the formation of the Supreme Committee for Monitoring Tax Reform,” indicating that “the efforts resulted in international interest from investors in tax reform in Iraq.”

Al-Sudani added that “the government worked to increase non-oil resources despite great caution due to the absence of a supportive political and social environment,” noting that “the index rose from 7% in 2022 to 14% in 2024.”

He noted that “tax revenues increased by 26% during 2024 compared to the previous year, and by 3% in the first half of this year compared to the same period last year,” stressing that “digital transformation has contributed to enhancing tax capacity and accuracy.”

Al-Sudani explained that “the tax inquiry platform has eliminated cases of name similarity, delays, corruption, and undermining the taxpayer’s confidence in tax procedures,” adding that “the system for tax payment receipts and their matching has been completed electronically after it was previously paper-based.”

He affirmed that “there is ongoing communication with reputable international companies to work towards achieving the highest international standards in the tax system,” stressing that “the draft of the new income tax law has adopted international standards, while adhering to social justice and tax allowances for those with lower incomes.”

He pointed out that “the new law that will be enacted soon will be business-friendly and supportive of the green economy and emerging projects,” indicating that “the Supreme Committee for Tax Reform has completed the policy paper on tax accounting for oil companies to address the problems and obstacles to their work.”

Al-Sudani added that “unifying tax procedures between the federal government and the Kurdistan Regional Government of Iraq has facilitated the processing of tax files for universities and private banks,” stressing that “the reforms being achieved represent a message to the citizen to support his political system and manage resources in the best possible way.”

He concluded by saying: “We will not allow a tax increase that leads to a business-repelling climate or comes at the expense of fairness in taxation.”

Shafaq.com

The Iraqi government told Shafaq News: The relationship with Washington has moved from “conflict” to “partnership”.

The Prime Minister’s Advisor for Foreign Affairs, Farhad Ala’addin, affirmed on Thursday that the United States’ decision to revoke the authorization to use force against Iraq confirms that the country is now fully sovereign and signifies a shift in the relationship from “conflict” to “partnership.”

Alaa al-Din told Shafaq News Agency that “this decision represents a clear shift in the nature of the relationship between Baghdad and Washington, from a logic of conflict and confrontation to a logic of partnership and cooperation based on mutual respect.”

He added that “the decision on the security level reinforces the principle of national sovereignty, supports political stability, and enshrines the path of normal relations between Iraq and the United States, in a way that serves common interests and enhances security and stability in the region.”

The Iraqi Foreign Ministry described the US Congress’s vote to revoke the authorization for the use of military force against Iraq as “historic” on Wednesday evening, stressing that this revocation represents a fundamental turning point in changing the legal nature of the relationship between the two countries .

In a statement, the State Department expressed its welcome for the “historic vote by the US Congress, in both the House of Representatives and the Senate, to repeal the 1991 and 2002 authorizations for the use of military force against Iraq, as part of the 2026 National Defense Authorization Act, and the Department looks forward to President Donald Trump’s ratification of the bill .”

She explained that “the completion of the stages of repealing the aforementioned authorizations for the use of military force, which are more than thirty years old, indicates a change in the convictions of American legislators for a number of internal and external considerations .”

The ministry stressed that “the cancellation of the two authorizations for the use of military force does not undermine counterterrorism efforts, as the 2001 Authorization for the Use of Military Force, issued in the wake of the September 11 attacks to counter the threats of al-Qaeda and other associated terrorist organizations, remains in effect .”

The ministry stressed “the commitment of the Government of the Republic of Iraq to strengthening bilateral relations in a way that contributes to building a long-term partnership that serves the interests of the two friendly countries and supports the stability of the Middle East region.”

Shafaq.com

Research Center: Iraq is at a pivotal moment to address its economy and revive the private sector.

The “ Center for Research and Strategic Studies ” stated that Iraq needs a “realistic diagnosis of its economic imbalances” in order to implement appropriate reform prescriptions, a step that will not succeed without a strong private sector, instead of relying on the state, which acts as if it is the sole engine of the economy, meaning that the country is facing a “pivotal moment.”

The Jordan-based “Links Center” said in a report translated by Shafaq News Agency that the Iraqi economy has suffered for many years from a clear paradox: it possesses large financial resources, but its ability to transform these resources into real and sustainable development is weak.

The center explained in its report that the relative financial stability that Iraq is witnessing today does not necessarily mean the soundness of the economic structure, but rather hides behind it accumulated structural imbalances resulting from excessive dependence on oil, the inflation of the role of the state, and the weakness of economic and administrative institutions,” adding that “any serious talk about reforming the Iraqi economy must start from a realistic diagnosis of these imbalances before moving on to reform prescriptions.”

According to the report, successive governments have succeeded in managing short-term stability by expanding public spending, taking advantage of oil revenues and high cash reserves. However, this approach has created a fragile economy that depends more on oil shocks than on production.

He continued, saying that public budgets have ballooned significantly since 2004, not as a result of growth in the productive base, but due to the expansion of operating expenses, especially salaries and subsidies, which has made the state the largest employer and source of income in the country. This has imposed a constant burden on public finances and limited the government’s ability to direct resources towards long-term investment and development.

The report argued that the economy cannot become a productive economy as long as government employment remains a substitute for real job opportunities in the private sector, adding that reforming the salary scale and linking wages to productivity, along with redefining the role of the state from a direct employer to a regulator and supporter, represents a fundamental step in the path of reform.

The report considered the social support system to be another example of structural dysfunction, explaining that the comprehensiveness of the support, despite its social importance, led to a great waste of resources and reduced the effectiveness of social protection.

He added that reform does not mean reducing support as much as it means redirecting it towards the most needy groups, and linking it to real economic empowerment policies that open the way for work and production instead of permanent dependence on subsidies.

The report stated that the energy sector represents one of the most prominent structural challenges that drain public finances and hinder growth, noting that the huge spending on electricity has not succeeded in providing a stable service, due to imbalances in management, governance and collection.

He pointed out that the continued flaring of associated gas is a glaring example of mismanagement of resources, as Iraq loses billions of dollars annually that could have been turned into a source of energy, income and job opportunities. Therefore, the report concluded that real reform in this sector requires a comprehensive restructuring, not partial or temporary solutions.

The report continued, stating that Iraq possesses important strengths, most notably monetary stability, high foreign reserves, and low inflation. However, these indicators will remain of limited impact unless they are translated into real growth in the real economy, which requires a radical reform of the banking sector to enable it to finance investment and production, and not just be an intermediary for trading liquidity.

The report concluded by saying that no economic reform in Iraq can succeed without a strong and effective private sector, explaining that the state is no longer able to continue as the sole engine of the economy.

He added that “what is required is a stable business environment that protects the investor, reduces bureaucracy, and provides clear and fair rules for competition, as the efficient private sector is not a substitute for the state, but rather a key partner in achieving development.”

The “Links Center” report concluded that the Iraqi economy stands today at a pivotal moment. Either the current financial stability will be invested in launching real structural reforms that rebuild the economy on the foundations of production and diversification, or dependence on oil and public spending will continue, with all the future risks that entails. It concluded by saying that “reform is not just a political option, but an economic necessity to ensure stability and development for future generations.”

Shafaq.com

A “political veto” against Halbousi… The president’s hammer is closing in on Samarrai

A Behind the scenes of the recent meeting of the (Sunni) political council, more than one scenario was revealed for deciding on the candidate for the position of Speaker of the new Parliament, in proportion to the number of seats allocated to the component.

According to an informed source, one of these scenarios involves nominating two candidates (former Speaker of Parliament Mohammed al-Halbousi and the leader of the Azm Alliance, Muthanna al-Samarrai), with a vote to be held on one of them next week in preparation for holding the first session of the House of Representatives in its sixth term.

According to data obtained by Shafaq News Agency, Al-Samarrai has the strongest chances, and if he wins the presidency of Parliament, the component’s share will go to Al-Halbousi’s party, including the Ministry of Defense.

But according to the source, the “Sunni Council” received signals from political parties (Shiite and Kurdish) that reject Halbousi’s return to the presidency of Parliament again, with the possibility of accepting him as Vice President of the Republic or the government, if the next government proceeds with a policy of “reducing expenses,” and therefore this matter may be unlikely.

The National Political Council represents the umbrella organization for the Sunni forces that won the last parliamentary elections held on November 11th, while the Sunni forces hold the position of Speaker of the House of Representatives in Iraq according to political custom.

Earlier today, the Electoral Commission identified the oldest member of parliament who will preside over the first parliamentary session as Amer Hussein Jassim Ali Al-Fayez, from the Tasmeem Alliance, from Basra Governorate, born on 10-25-1948.

Yesterday, President Abdul Latif Jamal Rashid set December 29 as the date for the first session of the Iraqi parliament.

The Iraqi constitution set clear deadlines for the formation of institutions after the ratification of the election results, starting with the President of the Republic calling on the House of Representatives to convene within 15 days to elect its Speaker and deputies, then electing the President of the Republic within 30 days, and assigning the Prime Minister and forming the government.

Burathanews.com

The worn-out currency is a problem that is worsening without solutions.

“No one will take it from me,” Zainab al-Khafaji (an employee) kept repeating as she wandered among the shops near Sayed al-Halib in the Mansour district, before we asked her: “What is it that no one will take from you?” She replied: “Five thousand dinars torn up and glued back together.” She added: “I don’t know who gave it to me when I was shopping, and I tried to buy something with it again, but everyone refused it.”

Al-Khafaji’s situation is like that of many citizens who suffer from the difficulty of making purchases with worn-out currency, unlike what happens, for example, in the Kurdistan Region of Iraq or neighboring countries.

Omar Sami (a vegetable seller) says: “I suffer from this problem every day, whether when taking money from customers or returning the change to them.”

He added that many shoppers get angry when he refuses to take or return worn currency, and the most common phrase is: “What am I going to do with it?” or “It’s not working, exchange it.”

Financial expert Thamer Al-Azzawi says: “The reason for not trading them is the difficulty of exchanging them, as one has to go to government banks and wait and go through other routine procedures.”

He added that “the solution to ending this phenomenon is to reach an agreement with exchange offices to exchange them with citizens, granting them facilities and privileges, or to resort to updating the currency as happened in many European and other countries, where plastic materials were used when printing.”

“The currency.”

Regarding the possibility of electronic payment as an easier alternative, Al-Azzawi said: “It is too early to say that electronic payment can replace cash. Yes, the experiment has been very successful thanks to the current government, but a large part of the citizens are still not confident in it and believe that cash is better and more reliable, even though the opposite is true.”

According to the Central Bank of Iraq, damaged banknotes can be replaced without penalty if the banknote is worn or damaged even if it is not torn and no parts are missing; if the banknote consists of two parts (with different serial numbers) and its area is similar to that of the original banknote and it is held together with adhesive tape; if the banknote is held together with one or more pieces of transparent adhesive tape along its length or width; if the banknote has a cut in more than one corner; if the banknote has a printing defect (in terms of design, size, color, or other security features that are present on genuine banknotes); if it contains stamps or writing that do not affect its external appearance; or if the banknote is missing less than

50% of its area.

However, the Central Bank confirmed the confiscation of damaged banknotes unfit for circulation if the banknote’s exterior has been altered by writing, drawing, printing, stamps, or if it contains adhesive material, or if the banknote has lost 50% or more of its area, or if it consists of two parts on one side. In the event that there is evidence that satisfies the Central Bank that the missing parts of the banknotes have been completely destroyed, they will be partially or fully compensated.

Completely. For his part, Subhi Hussein (a bus driver) says: “I have accumulated a lot of small denominations of 1000, 500 and 250 dinars, most of them damaged or with writings and other things on them.”

He added that many people pay with it under the pretext that they have no other, “which forced me to exchange it, but for a smaller value, because it is difficult to buy with it or exchange it at banks, as most banks refuse to accept it.”

Alsabaah.iq

The Cabinet approves {reducing expenditures and maximizing revenues}

The Cabinet yesterday approved the recommendations issued by the Ministerial Council for the Economy regarding reducing expenditures and maximizing revenues, as part of the economic and financial reform program. This comes at a time when the Prime Minister’s financial advisor, Dr. Mazhar Muhammad Salih, expects the state to achieve initial tax revenues of approximately 8 trillion dinars this year, representing about 50% of the total non-oil revenues estimated at between 16 and 17 trillion dinars, with the possibility of these revenues rising to 18 trillion dinars by the end of the year.

Saleh explained to Al-Sabah that these indicators reflect a gradual shift in the structure of public revenues away from total dependence on oil, as the government aims to raise the contribution of non-oil revenues to about (20%) of total public revenues, compared to less than (10%) in previous years.

The Ministerial Council for the Economy approved a package of decisions related to reducing spending and maximizing revenues, during an extraordinary meeting held on Monday, chaired by Prime Minister Mohammed Shia Al-Sudani.

The Council decided to equalize the salaries and allowances of all employees of the Presidency and the Parliament with those of the Prime Minister’s office. It also tasked the specialized committee within the Ministry of Planning with urgently updating the report on unifying the salary scale for employees, in accordance with the recommendations submitted on this matter. As part of the spending reduction measures, allowances for official travel for government employees were cut by 90%, and travel is now prohibited except in cases of necessity and with the approval of the relevant minister.

On the sidelines of the fifth regional conference of the Al Baraka Forum for Islamic Economics held in Cairo, the Governor of the Central Bank, Dr. Ali Al-Alaq, confirmed that Iraq has succeeded in reducing the inflation rate to about (1%), and increasing the size of foreign reserves, while maintaining the stability of the exchange rate, despite the fact that public finances depend on oil by more than (90%).

Alsabaah.iq

Al-Moussawi: Forming the new government may take a long time.

MP Mukhtar al-Moussawi affirmed on Wednesday that forming the new government in Iraq faces significant challenges and will not be achieved quickly without the consensus of all political factions, whether Shia, Sunni, or Kurdish.

Speaking to the Information Agency, al-Moussawi stated, “The continuation of the current situation without serious and urgent action to resolve the political disputes related to entitlements and the nomination of candidates will lead to a lengthy delay in the government formation process.”

He pointed out that “reaching an understanding on the presidency is the essential and necessary first step, followed by an agreement on the Speaker of Parliament, so that a date can be set for the opening of the new parliamentary session.”

He explained that “these steps are part of a political system followed in many countries to ensure the smooth and transparent progress of the constitutional process,” noting that “the continuation of the current stalemate and the failure to reach a swift agreement will cause the government formation process to take more than two months, negatively impacting political stability and hindering the implementation of the government plans and programs that the country is awaiting.”

Al-Moussawi called on “all political parties to expedite reaching an understanding and prioritize the national interest over partisan and factional interests, in order to overcome the current crisis and finalize the formation of the government as quickly as possible.”

Almaalomah.me