CITIZEN’S

BUDGETof
IRAQ
Contents
Section Page
Why a Citizen Budget? 1

What is the Iraqi Federal Budget? 2—3

Purpose of the document 4

Calendar and preparation process 4 —5

A citizen’s look: Understanding the Budget in 2018 6

How will public money be spent in 2018? 7

What is the source of public money? 8—9

Did you know? 10—11

Planned budget deficit in 2017 and 2018 12

How will the government finance the budget deficit in 2018? 12—13

Budget allocation by sector 14—15

Budget allocation for Governorates in 2018 16—17

Investment Expenditures 18—19

Budget Terminology (glossary of terms) 20—21

Contact Information for follow-up 21

Why a Citizen Budget?
The Ministry of Finance has prepared the country’s first citizen budget
document for 2018 to strengthen its commitment toward furthering
budget transparency, helping to raise public awareness about the federal
budget process. This document is a simplified version of the Iraqi
Federal Budget Law. It aims to explain how the budget is prepared,
illustrating the spending priorities and economic and social programs
that the government will implement to improve the well-being of
its citizens. The document presents information about government
revenues and expenditures planned for all sectors (including health,
education, social welfare, security, defense, and so on) for the current
and previous years.

1
 What you should know
about the budget
The 2018 budget
introduces new non-oil revenue measures to improve
the government’s fiscal outlook. These measures support the
government’s priority spending for social safety nets for the
most vulnerable, as well as for improving access to basic services
(health, education, electricity, and transport).

In addition, the 2018 budget features investment expenditure for

reconstruction — including increased electricity production —
in areas liberated from the Islamic State of Iraq and Syria (ISIS).

Iraq is slowly emerging from the deep economic difficulties

of the last three years caused by low global crude oil prices
and the fight against ISIS. Declining oil prices in 2015 and
2016 meant that the government had lower revenues than in
previous years to deal with heavy losses incurred during the
ISIS insurgency, which required high levels of spending on
humanitarian relief and security.

This situation resulted in an increase in the government’s budget

deficit for 2015-2017.

To finance these deficits, the Iraqi government increased its

domestic and external public debt, which doubled from 30 to 60
percent of gross domestic product (GDP) from 2014 to 2016.

2
In 2017, the fiscal deficit — which occurs when a government’s total
expenditures exceed its revenues — improved thanks to higher oil prices,
increases in non-oil revenues, and government expenditure limits on wages, Iraq’s oil prices increased to an
pensions and transfers. In fact, the improved security situation and the average of US$48.7 in 2017,
initial reconstruction effort saw non-oil growth reach 4.4 percent in 2017, after decreasing dramatically
from an annual average of
driven by construction and services, and higher private consumption and
US$96.5 per barrel in 2014 to
investments. However, overall growth turned negative at 0.8 percent in
US$35.6 in 2016.
2017, in part due to a 3.5 percent reduction in oil production. The reduction
was made to comply with the Organization of the Petroleum-Exporting The overall reconstruction and
Countries (OPEC)+ agreement to cut oil production until the end of 2018. recovery needs are estimated at
ID 104.2 trillion (US$88.2
In 2018, Iraq’s overall economic growth outlook is expected to improve billion), with ID 27 trillion
due to increasing oil production, a more favorable security environment, (US$22.9 billion) needed in the
and a gradual increase in investments in reconstruction and economic short term (2018–19) and ID
recovery. Growth is expected to return to positive territory at 2.5 77.2 trillion (US$65.3 billion)
percent in 2018, and to further accelerate to 4.1 percent in 2019. With needed for the medium term.
Source: World Bank. 2018. Iraq -
the maintenance of the exchange rate peg, average inflation — the Reconstruction and Investment: Volume
rate at which the general level of prices for goods and services rises Two - Damage and Needs Assessment
of Affected Governorates (English).
— is expected to remain at 2 percent over the projected period. Washington, D.C.

The overall fiscal deficit expected for 2018 will be contained at ID 19.7 trillion,
with planned revenues expected to reach ID 91.6 trillion, and spending expected
to exceed ID108 trillion.

In Trillion of Iraqi dinars (ID)

Deficit:
EXPENDITURES REVENUES 19.7 trillion

TOTAL 108.2 88.5 TOTAL

CURRENT 83 77.2 OIL

INVESTMENT 25.2 11.5 NON-OIL

3
PUR POSE OF THE DOCU M ENT

What is the Iraqi Federal Budget?

The Federal Budget Law of Iraq is the federal government’s plan for a given fiscal year
(January 1st – December 31st) in which it explains what policies and priorities it
aims to achieve, keeping in line with its medium-term budget strategy. The Federal
Budget Law is adopted and published annually and indicates the revenues (oil and
non-oil) that the government plans to generate and collect, as well as its plans to
spend the money on priority sectors (health, education, social welfare, security,
defense, and so on). Any government deficit that may occur may be covered through
government borrowing. For example, the government may borrow money to
implement priority programs and strategic projects.

Calendar and preparation process

The budget preparation process is an important task carried out by the Ministry of Finance
in cooperation with the Ministry of Planning, the Central Bank and other line ministries.

Ministry of Finance

Ministry of Planning Central Bank

BUDGET

4
 Ministry of Finance
Spending units M E MO

REPORT Objectives
Process

Council of Ministers

Minister of Finance

1 The process begins in May of each year with the 2 In June of each year, the Minister of Finance circulates
issuance of a report prepared by the Ministry of Finance internal memoranda to spending units in which it specifies
on fiscal policy priorities for the upcoming year. the objectives of the government’s fiscal policies and
BU DGET PROPOSA LS
provides guidance on the budget preparation process
based on the priorities set by the Council of Ministers.
Spending units
The federal budget preparation is based on the medium-
term budget strategy (three years) prepared by the Ministry
of Finance in collaboration with relevant authorities.

Minister of Finance

3 In July of each year, each spending unit submits a 4 The proposal of each spending unit is discussed in
budget proposal to the Minister of Finance. The proposal August of each year according to a timetable which
would include an estimate of expenditures for the given concludes at the beginning of September.
fiscal year, as well as an estimate of the revenues generated
through the activities of the expenditure units. Legislative Authority

GOV ER N M ENT FI NA NCI A L

Council of Ministers PER FOR M A NCE
DR A FT OF
FEDER A L
BU DGET

Minsiter of Finance
Federal Board of Supreme Audit

5 In September of each year, the Minister of Finance prepares a 6 The Legislative Authority and the Federal Board
draft of the federal budget and submits it to the Council of Ministers of Supreme Audit are responsible for monitoring
for approval. The Council of Ministers then submits the draft to the the government’s financial performance.
legislative authority in October of the same year. According to Article
(59) of the Iraqi Constitution of 2005: “The Council of Ministers
shall submit the draft budget law to Parliament for approval.”

5
A CITIZEN’S LOOK

Understanding the Iraq

Federal Budget for 2018
ID 1.5 Trillion
will be spent on financing the ration card
(public distribution system).

ID 1.52 Trillion
will be spent on financing wheat subsidies.

ID 1.3 Trillion
will be spent on importing fuel and energy.

ID 900 Billion
will be spent on financing purchases of medicines,
excluding other medical expenses.

6
 Contributions to International Grants
and Arab Organizations 240 Billion
445 Billion 0.2%
Debt interest
0.4%
payments Kuwait War
4.1 Trillion Compensation
3.8% Debt Amortization 772 Billion
8.2 Trillion 0.7%
7.7%

Investment Projects
25.2 Trillion
23.1%

Compensation of Employees
Oil-related projects
54.5 Trillion 12.7 Trillion
Non-oil related projects
11.9%
50.8% of total 12.4 Trillion
11.2%

Special Programs
Goods and Subsidies 559 Billion
Services 11 Trillion 0.5%
2.2 Trillion 10.3%

Other Expenses 2.1%

335 Billion
0.3% School Books
145 Billion
0.1%

How will public money

be spent in 2018?
Expenditures are expected to increase by 7.4 percent to ID 108.2 trillion
compared to ID 100.7 trillion in 2017.

7
What is the source of public money?
The global increase in oil prices, as well as an expected increase in oil
exports, are expected to have a positive impact on government revenues.
Revenues are expected to increase by 6 percent to ID 88.5 trillion, lifted by
both higher oil and non-oil revenues.

Taxes on incomes
and wealth
5 Trillion

Oil and mining 5.5%

revenues Commodity
taxes and
production fees
3.5 Trillion

77.2 Trillion 3.8%

84.2%
Other Transfer
revenues revenues
2.1 Trillion 2.1 Trillion
2.3% 2.3%

Fees
743 Billion
0.8%

Budget's share from public sector profits Capital

927 Billion 121 Billion
1% 0.1%

The year 2018 will witness an increase in oil revenues

The revenues from oil exports were calculated based on an average price of USD 46 per
barrel and a rate of export of 3.88 million barrels per day. These are based on an exchange
rate of 1,182 ID to USD for the year 2018.

Price of oil per barrel Average export rate Exchange Rate ID/US Price of oil per barrel
50 4.0 1,190
3.88 1,182
1,180 1,182
46
3.8 1,180
3.75
45

42 42 3.60 1,170
3.6

40 1,160
2016 2017 2018 2016 2017 2018 2016 2017 2018

8
New tax measures will be introduced in 2018
to improve non-oil revenues

20%
A 20 percent sales tax will remain on mobile phone
cards and internet networks.

10%
A 10 percent sales tax on restaurants and hotels in
accordance with the provisions of the dissolved Revolutionary
Command Council Resolution No. 36 of 1997.

5%
A 5 percent sales tax for all goods sold, except ration card items,
in malls and shopping centers and on services performed in the
men’s and women’s hair salons.

ID 25,000
An airport tax of ID 25,000 per ticket for foreign travel and ID 10,000
per ticket for domestic travel shall be imposed at all Iraqi airports.

30%
A 30 percent tax on imported alcoholic beverages and cigarettes
is levied on the value of the imported goods at the border port.
Fines are levied at 200 percent.

25%
A 25 percent tax on sweets, ice cream, dairy products, juices and
imported carbonated beverages is levied on the value of the
imported goods at the border port.

9
Did you know?
To support stabilization efforts and reconstruction of infrastructure in
governorates and areas previously subjected to the control of ISIS terrorists,
the government spent ID 150 billion on the reconstruction fund, executed a
number of sector projects in these areas, and secured a number of stabilization
and reconstruction loans from international organizations and partners such as
the World Bank, German Government, and others. In addition, the government
will be providing ID 420 billion to be spent directly in support stabilization and
the reconstruction of infrastructure in these areas, and distributed as follows:

The government spent ID 150 billion on the

reconstruction fund which will be distributed to the
following regions: Ninawa, Sala ad-Din, and Al-Anbar.

Ninawa
180 Billion

Kirkuk
18 B

Sala ad-Din
100 B

Diyala
18 B

Al-Anbar
100 B

Babil
4B

Reconstruction spending
In Billion of Iraqi dinars (ID)
50
100
150

10
 The state-owned banks The Ministry of Housing New staff grades will
shall grant loans to and Municipalities shall be assigned to those
citizens whose homes allocate lands to the who have been issued
have been demolished or martyrs’ families, political with correct decisions
damaged under ISIS prisoners and wounded by the inquiry committee
control of their areas persons of the security led by the Department
or as a result of military forces and the popular of Political Dismissals
operations. mobilization forces in Affairs of the Secretariat
good areas or disburse of the Council of
• Loans will have a maturity a cash allowance for the Ministers.
of ten years. value of the land,
Staffing and promotion
• The Ministry of Finance according to the laws in
decisions will be applied
force.
bears the interest for the in line with the approval
first five years. The deduction rate from the ministry of
(3.8%) from salaries and finance to activate all
• The beneficiary bears
allowances for public civil service staffing and
interest on the loan in the
sector employees and all promotion decisions
case of not paying
retirees will be cancelled. through 2016.
after the fifth year
The equivalent amount
Salary allowances of
• Detailed instructions issued will be deducted from
members of the Bureau
by the Ministry of Finance. the increase in the price
of the Speaker of the
of crude oil exports.
Parliament, Members of
Nominal salaries owed Parliament, and special
to employees in grade employees will be
provinces and areas reduced by 50, 45, and
that were under terrorist 40 percent, respectively;
control will be paid by this is in line with the
the government in Council of Ministers
lump sum. Resolution No. 282 of
the year 2015.

11
Planned budget deficit
in 2018 and 2017
The government budget deficit is the difference between the money
that the government has and what it will spend during a given year.

Revenues and expenditures, 2018 vs 2017

2018 PLANNED PLANNED Deficit:
Percent change from 2017 EXPENDITURES REVENUES 19.7 Trillion Percent change from 2017
7.4 TOTAL 108.2 88.5 TOTAL 6

8.8 CURRENT 83 77.2 OIL 14

-1.1 INVESTMENT 25.2 11.5 NON-OIL 7.4

2017 PLANNED PLANNED Deficit:

EXPENDITURES REVENUES 21.7 Trillion

TOTAL 100.7 79 TOTAL

CURRENT 75.2 67.95 OIL

INVESTMENT 25.5 11.1 NON-OIL

Actual revenues in 2017

Total: 83.3
Oil: 72.6
Non-oil: 10.7

How will the government finance

the budget deficit in 2018?
Public debt
The increase in the federal budget deficit for the years 2014 —2017
resulted in the government needing to borrow from various foreign and 135.9 T

domestic financial sources. As a consequence, the public debt in Iraq

86 T
grew from ID 86 trillion for 2014 to ID 135.9 trillion for 2017.

2014 2017
12
The total projected deficit for the federal budget
for fiscal year 2018 amounts to ID 19.7 trillion.
This amount will be mainly covered by:

External loans for

investment projects
5.5 Trillion
In 2018, twenty-two (22) government
departments and agencies will benefit from
foreign loans in the total amount of ID 5.52
trillion to finance investment projects.

Domestic and
foreign borrowing
7 Trillion
Domestic and foreign borrowing will be
reimbursed by the government. To
cover the budget deficit in 2018, the
government will borrow ID 6.83 trillion.
Of which:
Foreign budget support
4.9 Trillion

Domestic financing
2.1 Trillion

The remaining amount will be financed from the

surplus generated by changes in the oil prices.

13
Budget allocation by
sector in Iraqi Dinar
Top five greatest increases, 2018 vs 2017

+4.7 Trillion
International and domestic debt

+3.7 Trillion
Energy

+652 Billion
Ministry of Education and Culture

+501.5 Billion
Health

+500.7 Billion
Housing and Construction

14
Differences in allocations by sector, 2018 vs 2017
In Trillion of Iraqi dinars (ID)

Budget allocations
2017 2018

International and domestic debt 8.7 13.4

Energy 18.7 22.4

Ministry of Education and Culture 9.4 10

Health 3.8 4.3

Housing and Construction 1.3 1.8

Industrial Sector 1.1 1.3

Culture and Youth and Sports Clubs 1 1.1

Social Services 15.5 15.6

Transportation and Communication 0.4 0.5

Water and Sewage 0.3 0.4

Agricultural Sector 1.2 1.2

Defense and Security 20.4 22.8

Local and Central Public Departments 11.8 16.4

0 5 10 15 20 25

15
 Budget allocation for
Governorates in 2018
The government will allocate ID 16 trillion, 15% of the total budget,
to be spent by governorates across the country.

In addition, governorates will benefit from:

ID 400 billion that will be allocated for reconstruction and

development projects in all governorates based on population,
out of the total investment expenditures planned for 2018.

ID 400 billion that will be allocated tomikicon

Created by oil and gas producing
from the Noun Project
and refining governorates for priority projects to mitigate
impacts of oil and gas production and refining, including
environmental protection and preservation, out of total
investment expenditure allocations planned for 2018.

Created by BomSymbols
from the Noun Project

In oil and gas producing and refining governorates, each Created by Thomas Uebe
from the Noun Project

governorate will be allocated funds calculated as either

(i) 5% of revenues generated from crude oil produced in a
governorate, or (ii) 5 percent of revenues generated from crude
oil refined in a governorate’s refineries, or (iii) 5 percent of
revenues from natural gas produced in a governorate.

Created by Becris
from the Noun Project

16
 The 2018 federal budget includes transfers to KRG expected to reach ID6.6
trillion compared with ID12 trillion in 2017. The agreement reached
Dihok K U R between the federal government and the Kurdistan Regional Government
D
I S (KRG) requires that the KRG transfers the entirety of its oil export receipts,
T
estimated at ID 4.2 trillion for 2018, to the federal government.
Arbil

A
Ninawa

N
2018 As-Sulaymaniyah
2018 spending breakdown
Kirkuk Percent of spending in investments
4% 30%
Governorate Total
Ku
urdistan Region* 21% 6.6 Trillion
Sala
Baghdad province
Bag 7% 2.74 T
ad-Din
*As-Sulaymaniyah 19% 2.69 T
Diyala *Arbil 22% 2.50 T
Baghdad *Dihok
*Di 19% 1.65 T
Al-Anbar Basra Province 30% 1.23 T
Dh
hi Qar province 9% 909 Billion
Babil Wasit
Karbala' Babil province 7% 853 B
Diyala province 4% 721 B
Al-Qadisiyah Maysan Najaf Province 7% 602 B
Diwaniya province 7% 575 B
2018 spending An-Najaf Wasit province 13% 569 B
In Iraqi dinars (ID) Dhi-Qar
The holy city of Karbala
ala 8% 544 B
500 Billion Maysan province
pr 22% 476 B
Al-Muthannia Al-Basrah Muthanna province
Mut 6% 276 B
1
Grand Total
T 22.9 Trillion
1.5
2
2.5 Trillion

K U
Kurdistan Region totals
Dihok R 11.7 Trillion
D
I S Data not available for Dihok, Arbil,
T
and As-Sulaymaniyah
A

Arbil
Ninawa
N

2017 As-Sulaymaniyah
2017spending breakdown
2017
Kirkuk Percent of spending in investments
4% 35%
Governorate Total
Sala Kurdistan Region 35% 11.6 Trillion
ad-Din Baghdad province
Bag 5% 2.5 T
Basra Province 31% 1.1 T
Diyala Dhi Qar Province 6% 755 Billion
Baghdad Babil Province
Ba 4% 735 B
Al-Anbar Diyala Province 4% 619 B
Wasit Province 13% 569 B
Wasit Najaf Province 5% 506 B
Babil
Karbala' Diwaniya province 5% 504 B
The holy city off Karbala
Kar 4% 487 B
Al-Qadisiyah Maysan Kirkuk
Kir 20% 486 B
Maysan Province 10% 389 B
2017 spending An-Najaf Muthanna Province
Mut 5% 276 B
In Iraqi dinars (ID) Dhi-Qar Grand Total 20.5 Trillion

500 Billion
Al-Muthannia Al-Basrah
1
1.5
2 Trillion

17
Investment Expenditures
The development budget includes investment expenditures to improve
public infrastructure and provide citizens with quality education, health,
social and security services.

ID 25.2 Trillion
24% of total budget will be spent to undertake
investment projects across the country.

ID 5.5 Trillion
22% of total investment expenditures,
will be financed by external partners.

ID 16.6 Trillion
67% of total investment expenditures, will
be spent on projects in the energy sector.

ID 836 Billion
3.4% of total investment expenditures,
will be spent on projects executed by the
Ministry of Housing and Construction.

18
Disbursement by Ministry, Department, and Agency
Ministry Investment Projects Expenditures Expected Donor Disbursements

Ministry of Oil 13.5 Trillion 49 Billion

Ministry of Electricity 3.2 T 2.3 Trillion
Ministry of Defense 2.3 T 1.5 T
Kurdistan Region governorates 1.4 T 55 B
Ministry of Housing and Construction 840 Billion 358 B
Presidency of Council of Minsiters 580 B 274 B
Ministry of Interior 340 B 173 B
General and Local Adminitrations in Governorates 270 B 0
Counterterrorism apparatus 180 B 95 B
Ministry of Water Resources 170 B 254 B
National Investment Commission 150 B 0
Ministry of Transportation 130 B 80 B
Ministry of Education 105 B 95 B
Ministry of Health & environment 98 B 40 B
Ministry of Finance 91 B 8B
Ministry of Industry and Minerals 55 B 16 B
Ministry of Agriculture 42 B 34 B
Ministry of Trade 22 B 19 B
Ministry of Communication 16 B 9B
Ministry of Planning 4.4 B 2B
Baghdad Municipality 0 47 B
Others 1.2 T 0
0 5 10 15 0 0.5 1.0 1.5 2.0 2.5

Ministry Expected Donor Disbursements Investment Projects Expenditures

Ministry of Water Resources 59.8% 40.2%
Ministry of Education 47.4% 52.6%
Ministry of Trade 45.2% 54.8%
Ministry of Agriculture 44.7% 55.3%
Ministry of Electricity 42.6% 57.4%
Ministry of Defense 39.7% 60.3%
Ministry of Transportation 38.5% 61.5%
Ministry of Communication 36.9% 63.1%
Counterterrorism apparatus 33.9% 66.1%
Ministry of Interior 33.5% 66.5%
Presidency of Council of Ministers 32.3% 67.7%
Ministry of Housing and Construction 30.0% 70.0%
Ministry of Planning 29.8% 70.2%
Ministry of Health & environment 29.0% 71.0%
Ministry of Industry and Minerals 22.4% 77.6%
Ministry of Finance 7.6% 92.4%
Kurdistan Region governorates 3.8% 96.2%
Ministry of Oil 99.6%
General and Local Administrations in Governorates 100%
National Investment Commission 100%
Others 100%

% OF TOTAL VALUE 0 10 20 30 40 50 60 70 80 90 100%

*The Municipality of Baghdad received ID 47.2 billion from external partners in support of investment projects
19
Budget Terminology
(glossary of terms)
The Federal Budget: Annual Law which summarizes the government’s economic,
fiscal and social policies and indicates the revenues (oil and non-oil) that the
government plans to generate and collect as well as its plans to spend the money on
priority sectors (health, education, social welfare, security, defense, etc.).

Revenues are total taxes, fees, Expenditures are expenses made by the
and borrowing collected by a government to finance its operational budget,
government, and consists of: development projects, and to service its debt.

Petroleum means hydrocarbons, including, but Capital expenditures refer to the use of
not limited to, crude oil, natural gas, and natural funds to acquire or upgrade capital assets,
gas liquids and refined petroleum products. such as buildings, structures, machinery, and
equipment, and financial assets
Petroleum revenue is petroleum export
revenue, non-tax revenue earned from the sale Current expenditures are expenditures
of petroleum to domestic buyers (collectively, which are not capital expenditures, such as
petroleum non-tax revenue), and tax revenue salaries, supplies, services, and fuel.
levied on petroleum (petroleum tax revenue). Budget deficit: A budget deficit occurs when
Fiscal Revenues generated by compulsory a government’s total expenditures exceed the
payments including direct taxes that cover revenue that it generates.
income and wealth taxes. Government debt: All liabilities of the
Borrowings are funds received in return for a government that require payment or payments
legally binding agreement to repay of interest and/or principal by the borrower to
the lender at a date or dates in the future.

Inflation: Inflation is the rate at which the

general level of prices for goods and services is
rising and, consequently, the purchasing power
is falling.

20
Do you have questions?
Address: Hay Ala-loom, Bab Al Mud-ham,
Baghdad, Republic of Iraq

Tel: +964 790 194 2179 Email: [email protected]

Visit: http://www.mof.gov.iq/

Issued by:
Public Policy Department, Ministry of Finance
Data sources : Budget, Accounting, and Public Debt Departments ; Ministry of Finance

Th is issue was produced in collaboration with the World Bank and the European Union.

21
CITIZEN’S
BUDGETof
IRAQ