ERBIL, Kurdistan Region of Iraq - With only days left in the year, Iraq is set to end 2025 without approving a federal budget, raising concerns amid fluctuating, and mostly declining, oil prices. The situation has fueled calls to diversify funding sources and safeguard the rights of public employees and retirees.

Economists expect the 2026 budget to undergo restructuring in several spending areas, with the possibility of reducing some investment projects due to the financial challenges facing the country.

In an interview with The New Region, Moeen al-Kadhimi, a member of the parliamentary Finance Committee, said that “the incoming 2026 budget will be difficult and complex, especially since a full year has passed without approving an official budget for 2025, along with declining oil prices, which remain the government’s main source of revenue.”

Kadhimi said early assessments show “a need to control spending and improve non-oil revenues to avoid liquidity shortages that could affect government projects and public services.” He added that “the next parliament must plan to approve the 2026 budget before the end of the first quarter of the year, although the timeline will depend on how quickly financial studies and final reviews are completed with the Ministry of Finance and other government agencies.”

Regarding the issue of securing salaries, Kadhimi stressed that “there is strong concern for protecting salaries of employees and retirees, as well as social welfare. The priority will be sustaining monthly salaries and providing social support, while considering limited financial resources and the economic pressures resulting from lower oil prices. At the same time, the government is looking at alternative financing options, including diversifying revenues and improving spending efficiency, to ensure it can meet financial obligations without harming salaries or essential services.”

Kadhimi said the next budget will try to “balance reducing the fiscal deficit with encouraging economic growth amid unprecedented financial pressures,” adding that both the government and parliament remain committed to ensuring social protection for people with fixed incomes.

Economic expert Nasser al-Kanani also told The New Region that the 2026 budget will face major challenges, “especially after a full year without approving an official budget for 2025.”

Kanani said the absence of the 2025 budget “has caused the accumulation of some financial obligations and delayed key development projects, making it harder to prepare a balanced financial plan for next year.”

He said lower global oil prices remain a key factor shaping expected revenues, which make up most of Iraq’s budget. “With prices continuing to fall, some spending items will likely be restructured, focusing on essential priorities such as salaries for employees and retirees and basic services,” he said. “There is also a possibility of limiting some non-urgent investment projects.”

According to Kanani, early preparations for the 2026 budget began months ago. The government is expected to submit the draft to parliament during the first quarter of 2026, with official approval anticipated in the first half of the year.

He said the priority will be ensuring on-time payment of salaries for employees and retirees and reducing any direct impact on these groups. However, financial pressures may force the government to adopt temporary measures to limit the fiscal deficit.

Kanani emphasized the need to diversify revenue sources beyond oil “given global price volatility,” saying Iraq should strengthen non-oil revenues and encourage domestic and foreign investment to ensure sustainable government spending on essential services.

He said the current financial situation requires “careful and flexible management” of the upcoming budget “to protect the rights of employees and retirees, ensure continuity of essential development projects, and adapt to the unstable economic conditions caused by falling oil prices.”