Iraq drafts its largest budget ever while the IMF forecasts a 16 percent contraction

The draft 2027 federal budget sets public expenditure at 217.2 trillion dinars against projected revenue of 174.2 trillion, of which roughly 144 trillion is expected from crude sales — a deficit of about 43 trillion dinars, according to The National, which examined the draft. Foreign reserves are projected to fall from $109bn to $80.6bn, and Baghdad intends to seek an IMF financing programme for the first time in a decade. Against that, Prime Minister Ali al-Zaidi has directed that 500,000 contract and daily-wage workers be made permanent and that 120,000 new contract posts be created: 620,000 additions to a payroll already consuming the oil take. One caution on the arithmetic — the same article gives the dinar total as $143.6bn in its body and $144.8bn in its summary, so the dollar figure depends on an exchange rate the paper does not reconcile.

The macro backdrop is not ambiguous. Shafaq News, reporting the IMF’s October 2026 World Economic Outlook, records a forecast contraction of 16 percent in 2026 after a 0.4 percent contraction in 2025, with a rebound of 19 percent projected for 2027 and a current account deficit of 10.8 percent of GDP this year. The budget’s export assumptions run through Kurdistan. The draft would oblige the KRG to supply roughly 400,000 barrels per day for export — about double current Kurdish volumes, per a monthly digest published by the Washington-based DC Kurd, which also reports around 450,000 bpd moving toward Ceyhan in early October, some 200,000 of it from Region fields. KRG Deputy Minister of Natural Resources Ahmed Mufti called the target an “idealistic scenario” in a Rudaw interview: “To reach 400,000 barrels, companies must continuously receive their entitlements.”

Assessment: Read the payroll decision and the IMF approach together and the strategy becomes legible: hire into the state now, borrow against the rebound later. The 19 percent 2027 rebound in the WEO is what makes the spending line arguable on paper; it is also a forecast, and forecasts do not pay salaries in January. The 400,000 bpd clause is the weakest joint. It is a revenue assumption written into law that depends on international producers in Erbil deciding that Baghdad will pay them this time, and the KRG’s own deputy minister has already said publicly that it will not happen without guaranteed entitlements. Watch whether the IMF asks for the devaluation before the parliamentary vote, or after.