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Iraq Faces 2025 Fiscal Squeeze Amid Oil Price Decline, Adviser to PM Says 

A general view shows an oil rig used in drilling at the Zubair oilfield in Basra, Iraq, July 5, 2022. (Reuters)
A general view shows an oil rig used in drilling at the Zubair oilfield in Basra, Iraq, July 5, 2022. (Reuters)
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Iraq Faces 2025 Fiscal Squeeze Amid Oil Price Decline, Adviser to PM Says 

A general view shows an oil rig used in drilling at the Zubair oilfield in Basra, Iraq, July 5, 2022. (Reuters)
A general view shows an oil rig used in drilling at the Zubair oilfield in Basra, Iraq, July 5, 2022. (Reuters)

Iraq faces a budget crunch in 2025 due to the slump in the price of oil, the overwhelming source of government revenue, a top economic adviser to Prime Minister Mohammed Shia al-Sudani said.

"We don't anticipate major problems in 2024, but we need stricter financial discipline for 2025," Mudher Saleh told Reuters in an interview late on Monday.

Iraq, OPEC's second-largest producer, is heavily dependent on oil revenues. The hydrocarbons sector accounts for the vast majority of export earnings and some 90% of state revenue.

This huge reliance on oil makes Iraq particularly vulnerable to fluctuations in global crude prices.

Still, Iraq increased its budget in 2024 even after record spending in 2023, when more than half a million additional employees were hired into the already-bloated public sector and a capital-intensive nationwide infrastructure revamp began.

The 2024 budget rose to 211 trillion dinars ($161 billion) from 199 trillion dinars ($153 billion) in 2023, maintaining a projected deficit of 64 trillion dinars, Saleh said.

The budget assumes an oil price of $70 per barrel in 2024, around $6 less than the likely average price this year.

Saleh said that paying salaries and pensions on time remain a top priority. They account for 90 trillion dinars ($69 billion), or over 40% of the budget, and are a key factor of social stability in Iraq.

"The government will pay salaries even if it costs everything. Salaries are holy in Iraq," he said.

Infrastructure development, meanwhile, could be refocused on the most strategic projects - such as key road and bridge works in the capital Baghdad - if the state finds itself in a financial crunch, he said.

To bolster finances, Iraq is focusing on increasing non-oil revenues through improved tax collection but is not exploring any new levies, Saleh said.

He estimated that Iraq loses up to $10 billion annually due to tax evasion and customs-related problems.

Concerns for the 2025 budget reflect a challenging global oil market. Oil prices have been on a downward trend since mid-2022, with Brent crude, the international benchmark, falling from over $120 per barrel to below $75 in recent days.

This decline is largely attributed to weakening global demand, particularly from China, the world's largest oil importer, as its economic growth slows down.

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Arab World

Lebanon Begins Removing Palestinian Arms Outside of Refugee Camps

The army enters a position of a Palestinian group. (Lebanese Army)
The army enters a position of a Palestinian group. (Lebanese Army)
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Lebanon Begins Removing Palestinian Arms Outside of Refugee Camps

The army enters a position of a Palestinian group. (Lebanese Army)
The army enters a position of a Palestinian group. (Lebanese Army)

Lebanon kicked off on Saturday the process of removing weapons in possession of Palestinian factions outside of their refugee camps.

The arms are mainly held by groups allied with the ousted Syrian regime that were based in several areas in the Bekaa, South, Beirut and the border with Syria.

The Lebanese army announced on Saturday that it had taken over three military positions that were affiliated with two Palestinian factions that were close to Bashar al-Assad's former regime.

Two of the positions are in the eastern and western Bekaa and belonged to the Popular Front for the Liberation of Palestine – General Command. The third, in Rashaya, belonged to the Fatah al-Intifada group.

A security source told Asharq Al-Awsat that the army intelligence has been working on this issue for some time now and was close to completely resolving it.

The army said it had seized a large number of weapons and ammunition, as well as military gear.

The removal of the weapons outside state control is part of the ceasefire agreement reached between Israel and Hezbollah and which calls for dismantling all non-licensed military facilities that manufacture weapons in Lebanon.

The agreement also calls for removing all unlicensed weapons starting from regions south of the Litani River.

A similar agreement for the removal of Palestinian weapons was reached in March 2006, but it was never implemented.

A Lebanese security source, however, said that the latest progress in removing the Palestinian weapons has nothing to do with the ceasefire. Rather, it is related to the collapse of Assad's regime.

These factions were loyal to the regime, and they received funding and equipment from it, the source told Asharq Al-Awsat.

Hisham Debsi, the Director of the Tatweer Center for Studies, said the positions the army has taken over are tied to factions that are affiliated with Syrian security agencies.

He told Asharq Al-Awsat that the army should have been able to take over these locations as soon as United Nations Security Council resolution 1559 was issued in 2004.

The Palestinian Authority at the time agreed to the handover of weapons outside and inside refugee camps, but Hezbollah objected to the move and said it needed to be discussed at a dialogue among Lebanese political powers, Debsi went on to say.

At the dialogue, Hezbollah agreed to the removal of weapons inside and outside the camps, but it later thwarted the plan, he added.

The current removal of arms is tied to the implementation of resolution 1701 and others, notably 1559. It is also directly connected to the sudden and dramatic toppling of the Assad regime, he explained.

The Hayat Tahrir al-Sham, Syria’s interim rulers, had issued orders for Palestinian groups affiliated with the regime to lay down their arms. “These factions, which had raised the Palestinian flag and done nothing but harm the Palestinian and Lebanese people, no longer have their regional and Lebanese backers,” so they had no choice but to yield to the orders, Debsi said.

The conditions are ripe for the Lebanese state to impose its sovereignty, through the army, across all its territories and end the presence of any Palestinian armed groups outside the refugee camps, he stressed.

Moreover, the state has the right to impose its authority over the camps and remove the weapons there, he remarked.

At the moment, the removal of Palestinian weapons does not appear to be a precursor to Hezbollah laying down its weapons in areas north of the Litani.

Such a move demands a “major political decision that is off the table at the moment,” said the sources.