Iraq Faces Fiscal Crisis as 16-Month Budget Deadlock Freezes Projects

Iraq is facing a severe fiscal crisis after the federal budget remained unapproved for 16 months, leaving the government unable to move beyond temporary legal spending limits and deepening pressure on public finances. The delay has put economic activity and state investment at risk, with the country now operating on a monthly one-twelfth spending basis. The government was required to submit the 2025 budget tables to the Iraqi Parliament by the end of 2024, but no vote or approval was completed until May 2026. As a result, more than 4,000 projects have been suspended across the country, according to a member of the parliament’s subcommittee. Those frozen projects include hospitals, schools, bridges and water projects, underscoring the scale of the administrative and development backlog. Economists say falling oil revenues have eroded the state’s spending capacity and argue that broader private sector partnership is needed. The prime minister has said the government is preparing a new budget that prioritizes fiscal reform, diversification of revenue sources and anti-corruption measures. The prolonged deadlock has intensified concern that Iraq’s economy could face further strain if budget approval continues to stall.