Shafaq NewsFor millions of Iraqi households, the start of each monthcarries a single, overriding expectation: that state salaries will arrive, infull and on time. According to a 2024 report from the Ministry of Finance, morethan 35 million Iraqis now depend on public wages, turning government payrollsinto the country’s most dependable source of income. At a time of tightening oil revenues, political uncertainty,and a federal budget still stalled in parliament, those payments anchor Iraq’sfragile social stability. National Payroll EngineOver the past two decades, salaries, pensions, and welfarepayments have hardened into Iraq’s most important safety net. 2025 Data fromthe Ministry of Labour and Social Affairs show that around 4.5 million civilservants receive monthly wages, alongside 2.9 million civilian and militarypensioners. These numbers account for more than 40% of Iraq’s workforce —one ofthe highest ratios among oil-producing nations.In practice, a single public salary often supports severaldependents, including extended family members, elderly parents, and children.In Iraqi provinces where private-sector activity remains weak, these salariescirculate beyond the immediate recipient, sustaining local markets and smallbusinesses.: Rumors and panic: What’s really behind Iraq’s financial scare?Even minor delays can force families to postpone rent, cutfood spending, or defer education costs. Stability, therefore, rests less onhow much people earn than on whether payments remain predictable.Speaking to Shafaq News, financial adviser to caretakerPrime Minister Mohammed Shia Al-Sudani, Mudhir Muhammad Saleh, describessalaries, pensions, and welfare payments as “sovereign obligations” that cannotbe postponed. Monthly spending on these commitments reaches about 8 trillionIraqi dinars ($6.5B), rising to 96 trillion dinars ($78B) annually —nearly halfof total federal expenditure.“These payments give the budget an economic and socialdimension beyond accounting,” Saleh remarks.Why $55 per barrel MattersThat social contract rests almost entirely on oil. Accordingto 2024 data released by the International Monetary Fund (IMF), oil revenuesaccount for about 90% of Iraq’s total income.Within this reality, Iraqi authorities have identified $60per barrel as the critical threshold. Above it, payroll obligations can be metwith careful management; below it, fiscal options narrow sharply. Heavy revenueconcentration, fixed spending commitments, and limited reserves combine to makethis price floor decisive.Recent experience illustrates the dynamic. Oil pricesaveraging around $80 per barrel in 2024 allowed the payroll system to operatesmoothly, masking deep structural weaknesses in Iraq’s economy.: Iraq’s budget: political fiscal gaps threaten national stability in 2025By 2025, as prices slipped to roughly $65–70 per barrel,those vulnerabilities became harder to ignore. Declining revenues, compoundedby political deadlock over budget approval, pushed the government towardshort-term borrowing from the central bank and state-owned banks. Contractorpayments were delayed, while investment spending absorbed most of theadjustment.Looking ahead to 2026, with oil projected at or below $55per barrel, the payroll system faces a far tighter squeeze, testing the state’sability to preserve social stability.Speaking to Shafaq News, economic analyst Ahmed Eidcharacterizes the situation as “a deferred crisis rather than a temporarydeficit.” In his view, the danger lies less in abrupt salary cuts than in thegradual erosion of public finances through borrowing, reserve depletion, andpostponed reform.The core risk, he adds, is not immediate reductions in paybut the cumulative strain created by mounting debt and delayed structuralchange. “Reliance on oil, bloated spending, and weak non-oil revenues turn jobsecurity into a temporary illusion and put public finances to a harsh test,”Eid observes, warning that without serious reforms tied to the 2026 budget,“today’s salaries could threaten tomorrow’s stability.”Kurdistan as A Stress TestThe strain on salary payments is even more visible in theKurdistan Region, where payroll dominates public spending, and revenue volatilityquickly translates into social tension. In its 2024 report, the KurdishMinistry of Finance disclosed that the Kurdistan Regional Government (KRG) payssalaries to more than 1.2 million public employees. Wages account for anestimated 70–75% of Erbil’s total spending, leaving little room to absorbshocks.Under the Federal Budget Law, the KRG is required to delivera specified volume of oil to the federal government in exchange for budgetfunding. That mechanism has repeatedly stalled amid disputes over productionlevels, export transparency, and revenue accounting. When transfers are suspended or reduced, Kurdish authoritiesoften resort to staggered or partial salary payments, stretching disbursementsover weeks and intensifying public pressure.: Iraq’s public sector workforce set to shrink, private sector to take lead in a decadeThe latest escalation followed delays in May and June 2025salaries. The impasse eased only after an arrangement under which the Iraqigovernment required the KRG to deliver all oil production to the StateOrganization for Marketing of Oil (SOMO). Under this framework, the KRG mustexport a minimum of 230,000 barrels per day, with additional production alsoincluded. In return, the Iraqi Ministry of Finance will disburse an advance of$16 per barrel —either in cash or in kind— for the quantities received, in linewith the amended Federal Budget Law.Hard Fiscal ChoicesEconomist Mustafa Al-Faraj warns that the 2026 budget facesmounting fiscal pressure, marked by widening deficits and rising debt. He urgesthe Iraqi government to set the oil price assumption in the upcoming federalbudget at no less than $55 per barrel.“As long as oil is $55, salaries are safe,” Al-Faraj states.“But if prices fall below $50, covering payroll will become a real concern.”Cautioning that salary obligations may soon exceed what oilrevenues alone can sustain, he argues that this reality underscores the urgencyof genuine economic reform and credible support for the private sector,policies he noted successive governments have repeatedly endorsed in an effortto push Iraq’s economy beyond oil dependence.: Youth in despair, no jobs to share: Iraq’s workforce hanging in the airWritten and edited by Shafaq News staff.