Iraq’s Debt And Borrowing Continues To Grow As Iran Conflict Persists

  

The Iran War has thrown Iraq into a crisis. It depends upon oil exports to fund its government. While sales are increasing for now revenues are still far below pre-conflict levels. That has led Baghdad to borrow huge sums and draw from the country’s foreign reserves.

 

The Iraqi government recently released figures on its financial situation. Domestic debt rose from 90.5 trillion dinars at the end of 2025 to 109.5 trillion by the end of July. From May to July Baghdad was borrowing around 3 trillion dinars a month.

 

The Central Bank of Iraq has been sending U.S. dollars to banks who are then loaning it to the government. The result is that foreign reserves have gone from $97.432 billion at the end of last year to $80.63 billion at the end of July, a $16.8 billion decline.

 

This money has gone to supporting public salaries and services. In the first six months of 2026 Baghdad spent 7.438 trillion dinars approximately $5.67 billion a month on its payroll and welfare. 30.769 trillion was spent on salaries and 13.858 trillion on social services. The state maintains a huge and bloated government as government positions are handed out as patronage by the ruling parties and to fight unemployment which is high because the private sector is small and underdeveloped.

 

Iraq has known for years that being the most oil dependent country in the world has huge costs and yet it has done nothing to resolve it. Each year the government adds more and more jobs while oil revenue goes up and down. The elite simply does not care because it doesn’t understand economics. The state is there for them to loot and maintain their followers. The idea of economic reform is simply rhetoric that is sent to a committee which issues a report which never leads to action. That has put the country in another precarious situation with the Iran War. Even that won’t lead to any serious changes as the ruling parties believe that things will eventually go back to normal and things can continue as before.

 

SOURCES

 

Salem, Amr, “Iraq’s foreign reserves decline to $80.6 billion in July,” Iraqi News, 9/20/26

 

Al-Samarraie, Jawad, “Iraq domestic public debt surges 21% to 109.5 trillion dinars by July 2026,” Iraqi News, 9/22/26

- “Iraq spent 7.4T dinars monthly on salaries and welfare in H1 2026,” Iraqi News, 9/2/26