According to the amended Federal Financial Management Law No. 6 of 2019, the Iraqi Ministry of Finance continues to prepare the Federal General Budget Law for the upcoming fiscal year. If, due to the next parliamentary session, the budget law cannot be approved within the constitutional or legal timeframe, the government will operate in 2026 at 1/12th of the actual expenditures for 2025, including ongoing investment projects, foreign commitments, and other eligible expenses. Financial activity will continue to collect revenue and disburse funds through the expenditure provisions specified in the Federal Financial Management Law until the 2026 budget is approved by the Council of Representatives.
“The Government Discusses Preparing the 2026 Budget”
As the government’s constitutional term approaches its end, discussions about preparing the 2026 budget open the door to one of the most complex issues in financial management: the final accounts file, which has suffered from prolonged neglect for years. Despite the clear constitutional provisions requiring the government to submit these accounts annually to the Council of Representatives to ensure transparency and oversight of public wealth, their continuous absence has kept government expenditures in gray areas, away from scrutiny and accountability. As the Ministry of Finance begins drafting a new budget before the 2025 budget schedule is approved, warnings have been issued that the country is heading towards a complex financial and constitutional crisis, especially after the Federal Supreme Court affirmed the government’s commitment to submitting final accounts on time. Economists believe that this government step is more electoral than economic, given the clear inability to address expenditure problems, rising debts, and stalled projects.
The Federal Supreme Court ruled that the current government and the Ministry of Finance must submit final accounts within the constitutional deadline, based on a legal claim filed by Raed Fahmy, Secretary of the Central Committee of the Iraqi Communist Party, after several legal court sessions to resolve the issue. The importance of final accounts lies in providing an accurate report on revenues and expenditures during the fiscal year, which contributes to presenting a clear picture of how public money is managed. Moreover, these accounts help monitor the consistency of expenditures with the approved budget and help uncover any violations or irregularities that may occur in this area. It appears that the paralysis of these accounts has also extended to budgets. Governments are unable to present financial budgets, despite the current government’s “innovation” of a “three-year budget.” However, it has still failed to submit this year’s budget to parliament. The year 2025 passed without a financial budget and final accounts. Meanwhile, the government, with only 20 days left in its term, discussed starting preparations for the 2026 budget. Parliament also failed to hold its regular sessions, as several important pieces of legislation accumulated on its agenda.
“Problems of the Parliamentary Finance Committee”
A member of the Parliamentary Finance Committee strongly criticized the government’s announcement to prepare the 2026 budget without approving the 2025 budget, describing the step as an “incorrect procedure.” There are concerns that the Ministry of Finance is starting to prepare the 2026 budget while it has not yet approved the 2025 budget schedule, despite the fiscal year nearing its end, as well as the constitutional terms of the government and parliament. Starting discussions or preparing the 2026 budget without settling the 2025 budget is an unhealthy administrative and financial procedure. Executive bodies are legally bound to implement the three-year budget previously approved by parliament, and not to pass it without approving the schedules for the current year. The country is suffering from delays in payments to governorates, investment projects, and salaries for some groups due to the non-approval of the final 2025 budget schedule. This makes any discussion of a new budget far from a realistic basis in the absence of final accounting for the current year.
It is expected that the 2026 budget “will be for only one year, after the three-year budget experiment proved its failure in practical implementation. The Finance Committee closely monitors this issue and demands official clarification from the government regarding the reasons for the delay in settling the 2025 budget and the mechanism for continuing the 2026 budget in the absence of necessary legal and oversight foundations. Although Dr. Mazhar Mohammad Saleh, the Prime Minister’s advisor, stated that the Ministry of Finance has begun preparing the 2026 budget, he stressed that financial activity in the country will continue even if the budget is delayed.
“Long-term Budget Preparation Crises in Iraq”
Economic experts emphasize that successive governments – including the current one – have still failed to prepare a realistic budget that reflects Iraq’s financial needs and is consistent with its capabilities and real revenues. The 2026 budget, considering the current political and economic conditions, “will be excessively complex.” Iraq has been suffering from a prolonged crisis in preparing its general budget for years. The government has not yet reached the stage of final accounting, which in turn suffers from accumulated legal and administrative problems. Oil price fluctuations remain the biggest obstacle to financial stability, as the state has failed to find stable sources that can be relied upon in estimating future revenues. The investment budget remains unclear and has not achieved tangible results on the ground, except for some projects funded through government bonds issued by the state. These bonds represent domestic debts that have accumulated alongside foreign debts, increasing the financial burden on the state.
The next political phase, whether the Prime Minister continues his term or a new government is appointed, will face several challenges, as the budget is often linked to intense political conflicts within parliament. Governments in Iraq continue to legitimize their failures by referring to the accumulated past, considering the legal and constitutional accountability for delaying budget preparation. The absence of a budget in previous years has become a common occurrence in Iraq due to weak constitutional oversight, while the Federal Court was supposed to hold negligent parties accountable, but this has not happened so far. “The government does not have the authority to prepare them.”
“Conclusion”
There are two hypothetical scenarios for the 2026 budget:
Scenario 1: Assumes an oil price of $60 per barrel and references the government’s program for continuous public spending, which ensures the maintenance of investment project volumes and employment rates.
Scenario 2: Involves increased pressure on public finances and a budget deficit, which necessitates borrowing, either through domestic loans, which would impact cash flow, or potentially foreign borrowing. The latter option is less likely as it would increase Iraq’s accumulated foreign debt. The stability of oil prices at $70 per barrel depends on market instability and international political balance, making this scenario full of risks.
Iraq’s domestic and foreign debts have reached approximately $150 billion, with domestic debt rising to 91 trillion dinars and foreign debt reaching $54 billion. It also indicated that the budget deficit is very large and cannot be resolved through loans and bonds.
