Iraq proposes oil price assumption of $58 per barrel in draft budget

• The budget projects crude oil exports of approximately 4 million barrels per day, including shipments from the Kurdistan region
• Iraq is considering adjusting the dinar's exchange rate to between 1,400 and 1,500 per US dollar from the current rate of around 1,300
• Disruptions to shipping through the Strait of Hormuz have prompted Iraq to seek alternative export routes after Gulf crude shipments were interrupted

Iraq Proposes $58 Oil Price Assumption in 2027 Draft Budget

Iraq's government has submitted its 2027 draft budget proposal based on an oil price assumption of $58 per barrel, according to parliamentary finance committee members. The budget projects total spending of 217 trillion Iraqi dinars ($166 billion), which would result in a deficit exceeding 40 trillion dinars.

Key Budget Parameters:

• Oil price assumption: $58/barrel
• Projected spending: $166 billion (217 trillion dinars)
• Budget deficit: Over 40 trillion dinars
• Crude oil export target: 4 million barrels per day, including shipments from Kurdistan region

Currency Adjustment:

The government is considering devaluing the Iraqi dinar, adjusting the exchange rate to between 1,400-1,500 per US dollar from the current rate of approximately 1,300. This represents a potential depreciation of 8-15%.

Market Context:

Oil sales constitute the majority of Iraq's state revenues, making the budget heavily dependent on global crude prices. The country faces additional challenges from shipping disruptions through the Strait of Hormuz, which have interrupted Gulf crude shipments and forced Iraq to explore alternative export routes and transportation options.

Implications:

The relatively conservative oil price assumption of $58/barrel suggests fiscal caution, particularly given current market volatility. The substantial budget deficit and potential currency devaluation indicate fiscal pressures facing Iraq's economy. The disruption to traditional export routes through the Strait of Hormuz could impact Iraq's ability to meet its 4 million bpd export target, potentially affecting global oil supply dynamics and the country's revenue projections.