Baghdad: As Iraq approaches the formation of a new government following the November 11 elections, the nation grapples with a deepening economic crisis. Caretaker Prime Minister Mohammad Shia' Al-Sudani has implemented swift austerity measures, sparking mixed reactions and conflicting assessments of the economic landscape. Despite possessing the world's fourth-largest oil reserves and being the second-largest producer within the Organization of the Petroleum Exporting Countries (OPEC), Iraq finds itself in financial distress.
According to Kuwait News Agency, the public's focus has shifted from security and political issues to economic concerns, with social media and news outlets inundated with grievances over unexpected hikes in utility bills, fees, and taxes. Contractors have protested against delayed payments, threatening legal action, while government employees face salary delays. Traders have expressed discontent over increased customs tariffs on a broad range of goods, including vital imports like medicines.
Imad Al-Rishawi, mayor of Rutba district in Anbar province, highlighted in a press release that the new tariffs have severely impacted trade with Jordan via the Trebil crossing, reducing truck traffic from over 200 daily to a mere 10. These challenges underscore Iraq's financial strain, exacerbated by fluctuating oil prices and escalating public expenses, such as wages and social welfare, amounting to approximately 9 trillion Iraqi dinars monthly (around USD 6.8 billion).
To address the crisis, Al-Sudani's caretaker administration has enacted stringent economic policies, convening four Ministerial Council for the Economy meetings within a month. On December 18, Al-Sudani led a discussion on tax governance, mandating a review and restructuring of tax systems to enhance non-oil revenue. New customs tariffs were introduced on January 1, increasing duties on imports by 5 to 30 percent, with additional taxes imposed on mobile recharge cards and internet services per Cabinet Decision 1083 of 2025.
Despite these measures, criticism has emerged from members of the newly elected parliament, expected to vote on a new government soon. MP Mona Al-Ghurabi of the State of Law Coalition argued that the caretaker government's actions lack constitutional authority, asserting that only parliament can impose taxes. She pledged opposition to what she described as government "confusion" burdening citizens financially.
Conversely, some financial specialists have praised the measures, suggesting they address structural issues and enhance non-oil revenues. Iraqi Economist Mahmoud Dagher told KUNA that the decisions were well-considered and emphasized the necessity for the next government to continue these reforms, as Iraq must diversify its economy beyond oil.
The measures align with the International Monetary Fund's (IMF) recommendations following a mission to Iraq. The IMF highlighted slowed non-oil growth, an increased fiscal deficit, and vulnerabilities linked to an expanding public wage bill. The organization advised reviewing spending, reassessing customs fees, and reforming personal income tax, among other recommendations, to address the economic challenges facing Iraq.