Iraq Builds 2027 Budget on $58 Oil—and a Very Large Deficit

Iraq is fashioning its 2027 budget around an oil price of $58 per barrel, which is significantly lower than the amount required to balance its books. The preliminary budget projects crude exports of around 4 million barrels per day, encompassing the Kurdistan region, with total spending amounting to 217 trillion dinars, or approximately $166 billion.

Even with these assumptions, lawmakers assert that the budget would result in a deficit of over 40 trillion dinars. At a production level of 4 million barrels per day and a price of $58 per barrel, Iraq would generate roughly $85 billion in annual gross crude export revenue, excluding discounts, transport expenses, and other modifications.

This figure falls short of the required amount. For instance, the International Monetary Fund estimated Iraq's 2025 fiscal oil breakeven price at approximately $92.43 per barrel. While Baghdad might be basing its budget calculations on an oil price of $58, if the price actually averages $58 in the coming year, Iraq would face a deficit of more than 40 trillion dinars.

The government is contemplating weakening the dinar to a range between 1,400 and 1,500 per U.S. dollar from its current level of around 1,300. Since Iraq sells oil in dollars but incurs heavy spending in dinars, a weaker currency elevates the local-currency value of every export dollar. It also makes imported goods pricier. Oil remains the principal source of Iraqi state revenue, leaving the government highly susceptible to any disruption in either production or exports.

This vulnerability became evident this year. The Iran war disrupted shipments through the Strait of Hormuz, Iraq's primary export route, compelling Baghdad to push more barrels north through Turkey and explore longer-term options via Syria and Jordan. Iraq aims to drastically increase production, targeting 8 million to 10 million barrels per day within six years.

This creates a rather straightforward issue for the 2027 budget: Iraq needs more barrels, more export routes, and a far higher oil price than $58 to sustain the spending trajectory it already has.