In a statement to the Iraqi News Agency (INA), the Iraqi Prime Minister's financial advisor Mazhar Muhammad Salih said that the country's total public debt is at manageable levels according to international standards. Salih said the government aims to increase the share of non-oil revenues in total public revenues to 45 percent over the next 10 years.
Salih stated that in assessing public debt, not only the debt-to-revenue ratio is considered, but international institutions also take into account factors such as the debt-to-GDP ratio, debt service costs, and the state's revenue-generating capacity.
Noting that the majority of Iraq's debt is domestic and that external debt has declined in recent years, Salih stressed that the main challenge stems from public finances being heavily dependent on oil revenues. He said that any drop in oil prices raises the debt-to-revenue ratio and increases pressure on the budget, even if total debt does not increase significantly.
Salih disclosed that external debt maturing by 2028 does not exceed approximately $9 billion, and that the total public debt-to-GDP ratio, including domestic debt, is around 36 percent. He said this ratio remains within manageable limits when compared to the international threshold of over 60 percent.
The financial advisor noted that this ratio could fall further if pending obligations under the 2004 Paris Club agreement are completed. He stated that debts to about eight countries, including Gulf states, are expected to be at least 80 percent written off under the terms of the agreement.
Salih reported that domestic debt exceeds 100 trillion dinars (approximately $80 billion), and noted that as long as external debt remains manageable, the impact of domestic debt on Iraq's financial independence is limited.
On the other hand, Salih warned that if oil prices fall, the persistence of the fiscal deficit and dependence on borrowing could reduce the flexibility of fiscal policy and increase the need for reform and financing. He said the International Monetary Fund (IMF) also holds the view that Iraq's main challenge is not the size of the debt but rather controlling the fiscal deficit and diversifying revenue sources.
Salih stated that the government aims to gradually increase the share of non-oil revenues, currently below 10 percent, to 45 percent within 10 years, and explained that to achieve this target, plans include improving tax and customs revenues, automating fiscal systems, broadening the tax base, revitalizing the private sector and investments, and reforming the banking sector.
Salih added that it will take time for these measures to fully reflect in fiscal reality, but they are the most sustainable path to solving the liquidity problem, reducing oil dependence, and increasing the resilience of the Iraqi economy to external shocks.
Salih also noted that there are overdue financial obligations to the private sector, such as contractors and farmers, roughly equivalent to the size of domestic debt, and stated that if they cannot be paid, they will be legally incorporated into domestic debt and settled.
