Iraq's debt hits $150 billion as central bank sounds alarm

Iraq's Central Bank (CBI) Governor, Ali al-Allaq, has revealed that the country’s total domestic and foreign debt has risen to around $150 billion, according to the latest official estimate of the state's financial obligations.

A document issued by the CBI and seen by The New Arab has sparked public concern. Iraqis say whoever forms the next government after the 11 November parliamentary elections must set out a clear economic plan to shield the country from further financial shocks.

Iraq depends on oil revenues for more than 90 percent of its income. Economists warn that if global oil prices drop to around $50 per barrel, the government could face an immediate crisis and struggle to pay its vast public sector wage bill.

Responding to a parliamentary inquiry from MP Raed al-Maliki on 18 October 2025, al-Allaq said domestic debt had climbed to about 91 trillion Iraqi dinars, while foreign debt stood at roughly $54 billion. Of that, $43 billion dates back to before the 2003 US- and UK-led invasion, and around $10 billion has been incurred since.

"The public budget deficit, meaning the gap between spending and revenues, is very large and cannot be covered through loans or bond issuance," al-Allaq said, adding that "the US Federal Reserve does not impose any restrictions on Iraq’s oil revenues".

He also noted that Iraq holds $11 billion in US bonds as part of the CBI’s reserve strategy to "maintain monetary stability".

Economists warn of long-term risks

Iraqi economists and politicians have warned that continued borrowing could weaken Iraq’s economy, currency, and political independence.

"Any country with growing loans sees its credit rating decline," said Ahmed Haji Rasheed, a former MP and current election candidate. "Iraq’s credit rating is already minus B. More borrowing will further weaken it."

He warned that increasing debt could lead to tougher loan conditions, higher interest rates, and a weaker dinar against the US dollar.

Haji Rasheed blamed both past and current prime ministers for ignoring economic safeguards.

"Former and current leaders, especially the prime ministers, disregarded financial precautions," he said. "Prime Minister Mohamed Shia al-Sudani effectively acts as finance minister. Every government has increased spending to boost its popularity."

He said Sudani's three-year budget for 2023–2025, approved by parliament, allowed all factions to benefit from public spending.

"Sudani also added one million employees to the public payroll," he added. "In 2019, Iraq needed 49 trillion dinars for wages; now it needs 60 trillion."

Haji Rasheed predicted Iraq could remain in debt for decades. "I once estimated that Iraq would pay its debts until 2053. With current borrowing, repayment could stretch even further," he said.

He also raised geopolitical concerns, warning that Iraq's foreign loans could expose it to external pressure.

"External loans are traded like any commodity. With Israel now part of the Paris Club, it could buy Iraq's debts and use them to pressure Iraq to normalise ties," he said.

CBI seeks to calm public concern

Amid public alarm, the CBI issued a clarification on Sunday seeking to downplay fears about the country’s debt burden.

It said the planned deficit in the three-year budget approved by parliament was 191.5 trillion dinars, while the actual deficit was only 35 trillion dinars—financed mainly through domestic bonds and treasury bills. Actual borrowing, it added, accounted for just 18.2 percent of the planned figure, reflecting close coordination between the government and the central bank.

The CBI also said Iraq’s outstanding foreign debt does not exceed $13 billion once suspended or unclaimed pre-2003 debts are excluded, and stressed that Iraq “has not defaulted on any of its obligations” and maintains “an excellent financial reputation regionally and internationally.”

It added that the 91 trillion dinars in domestic debt includes 56 trillion accumulated by the end of 2022 and 35 trillion from the 2023–2025 budgets, most of which is held by state-owned banks. The government is now working with international consultants to convert part of this debt into investment instruments through a national debt management fund.

According to the CBI, Iraq’s public debt-to-GDP ratio remains below 43 percent - a level it described as "moderate and within safe international limits".

The bank concluded by saying it is developing a financial sustainability plan to support government reforms, diversify non-oil revenues, and reduce Iraq’s heavy dependence on crude exports.