Baghdad, Iraq – A colloquial phrase by Iraqi Minister of Health Abdul Hussein al-Musawi uttered at a meeting for medical staff, health workers and others in Baghdad made many Iraqis concerned. In an unprecedented moment of candour before his ministry’s employees, the minister revealed that the government has now placed securing salaries at the forefront of its priorities amid a stifling liquidity crisis. This marks the first time a government minister has spoken so clearly about the difficulty of financing the state’s basic expenditures.
According to the minister, the Iraqi government needs approximately 10.8 trillion dinars per month ($8.24bn), based on the Central Bank’s exchange rate, to cover salaries and basic obligations. This comes at a time when oil revenues are declining sharply following the halt of exports through the Strait of Hormuz, bringing back to the forefront the fragility of Iraq’s single-resource-based economy. The effects of the financial crisis have begun to surface in street conversations, particularly among employees anxiously awaiting their salaries amid fears of mounting living pressures.
Government employee Amira Ali tells Al Jazeera the delay in salary disbursements has directly impacted the daily lives of families, forcing many to postpone meeting their basic needs. She adds that the continuation of the crisis will lead to a further decline in living standards, alongside rising living costs and the difficulty of providing for family requirements. Meanwhile, government employee Bashar Sabbar tells Al Jazeera that the delayed salaries have cast a shadow over employees facing financial obligations and repayment deadlines that cannot be postponed.
He notes that despite the extent of harm inflicted on citizens, the repercussions of the disruptions in the Strait of Hormuz and the current economic crisis present challenges that exceed the government’s capacity, emphasising that the citizen remains the weakest link and the most affected by the crisis. A government source revealed to Al Jazeera that the crisis has moved beyond the warning stage, following the widening gap between the state’s actual revenues and its monthly obligations. The source, who requested anonymity, says the total salaries of civil servants, retirees, and social welfare beneficiaries amount to 7.8 trillion dinars per month ($6bn).
While the government has managed to disburse 3.5 trillion dinars so far ($2.7bn), and the Ministry of Finance provided an additional 1.65 trillion dinars ($1.3bn), this still leaves a deficit of 3.2 trillion dinars ($2.4bn) to cover the current month’s salaries. He adds that state revenues during the past months of May and June did not exceed 3 trillion dinars per month ($2.3bn), a figure far lower than the volume of current spending, primarily on salaries. The crisis comes at a time when the government of Prime Minister Ali al-Zaidi was proposing an economic program based on implementing the “Development Road” project and expanding partnerships with the private sector and international companies, in an attempt to restructure the economy and reduce its reliance on oil.
However, the closure of the Strait of Hormuz exposed the limits of Iraq’s ability to face crises. The halt in oil exports led to a sharp decline in revenues, compounded by the stalling of projects to diversify export outlets through Turkiye, Syria, Jordan, and Saudi Arabia due to years-long political disputes, leaving the government facing an unprecedented financial test. In an official acknowledgement of the crisis, Iraqi government spokesman Haider al-Aboudi said last Friday that the government may be “forced into domestic and external borrowing” if the repercussions of the Strait of Hormuz closure continue.
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