Government Confirms Public Debt Stability, Unveils Plan to Boost Non-Oil Revenues Over Upcoming Decade

The Prime Minister's Financial Advisor, Mazhar Mohammad Saleh, affirmed on Friday that Iraq's total public debt remains within manageable and safe limits, in accordance with established international standards. Saleh revealed ambitious government plans aimed at increasing the share of non-oil revenues to 45% of total public revenues over the next ten years. Elaborating on this financial stance, Saleh explained that discussions about the economy entering a "danger zone" when public debt exceeds 40% of public revenues must be understood within a comprehensive context of interconnected financial indicators. He noted that international institutions do not rely solely on this indicator but also consider the debt-to-GDP ratio, the cost of debt service, and the state's capacity to generate and sustain revenues. Saleh added that the majority of Iraq's debt is internal, while external debt has seen a significant reduction in recent years. This reality makes the primary challenge related to the nature of public revenues, which heavily depend on oil proceeds, thus exposing public finances to continuous fluctuations in global oil prices. He warned that any decline in oil prices could raise the debt-to-revenue ratio and increase pressure on the general budget, even if the public debt itself does not see a substantial increase. Regarding external debt, the advisor clarified that the amounts due for repayment by 2028 do not exceed approximately $9 billion. When internal debt is added, the total debt constitutes about 36% of the Gross Domestic Product (GDP), a percentage considered within globally accepted limits, which may exceed 60%. He also indicated the possibility of further reducing this percentage if the outstanding amounts under the 2004 Paris Club agreement are settled, an agreement that has not yet been finalized. These obligations are owed to eight countries, including Gulf states. Their settlement is expected to lead to the write-off of at least 80% of these amounts, possibly more, in accordance with the standard terms of the agreement. Concerning internal debt, Saleh clarified that it has surpassed 100 trillion Iraqi dinars, equivalent to nearly $80 billion when calculated in foreign currency, representing the largest portion of the total public debt. He pointed out that the impact of this internal debt on Iraq's financial independence remains limited as long as external debt stays within manageable levels, especially since external commitments due by 2028 remain relatively limited. Saleh warned that a persistent fiscal deficit and reliance on borrowing, particularly in the event of declining oil prices, could diminish financial policy flexibility and increase the need for urgent reform and funding measures. In this context, he confirmed that the International Monetary Fund (IMF) shares Iraq's view that the primary challenge lies not in the size of the debt but rather in containing the fiscal deficit and diversifying public revenue sources. As part of efforts to diversify revenues, the advisor stated that current financial policy aims to gradually increase the contribution of non-oil revenues. The goal is to raise this contribution to approximately 45% of total public revenues over the next ten years, up from the current situation where these revenues do not exceed 10% of the total. Saleh explained that achieving this goal requires improving tax and customs collection mechanisms, automating financial systems, expanding the tax base, stimulating the private sector and investment, and reforming the banking sector. He clarified that while these measures require time to fully reflect on the financial reality, they represent the most sustainable path to address liquidity problems, reduce reliance on oil, and enhance the Iraqi economy's ability to withstand external shocks and achieve long-term financial stability. Finally, Saleh noted the existence of outstanding dues to the private sector, including contractors, farmers, and others, equivalent in volume to the internal debt. He indicated that these "arrears," if not paid, would fall under the category of internal debt for proper settlement.