Manar Al Obaidy: Iraq current account dropped 41% despite non-oil gains

Baghdad (IraqiNews.com) – Iraq’s general current account witnessed a sharp contraction of 41% over the course of 2025 compared to the previous year, according to a financial analysis by prominent Iraqi economic expert Manar Al-Obaidy. This steep decline followed a 21% drop in the national trade balance, underscoring the Iraqi economy’s acute vulnerability to external market shocks and volatile global energy corridors.

The significant downturn has caught the attention of macroeconomic analysts, primarily because it occurred alongside several highly positive domestic indicators. Al-Obaidy highlighted that during 2025, Iraq made notable strides in restructuring its local market footprint, yet these efforts were ultimately overwhelmed by broader macroeconomic pressures.

On the domestic front, Al-Obaidy’s analysis points out that Iraq’s financial and trade sectors demonstrated active structural improvements throughout 2025. Government initiatives aimed at protecting local liquidity led to two major achievements:

• Surge in Non-Oil Exports: The country experienced a visible rise in non-oil exports, driven almost entirely by the commercialization and export of refined petroleum products and chemical derivatives.
• Reduction in Government Imports: Total public sector procurement from foreign markets dropped significantly, reflecting tighter fiscal discipline and a concerted effort to curb unnecessary foreign spending.

Despite these positive internal dynamics, the net result was a substantial contraction in the nation’s external financial surplus. Al-Obaidy noted that the domestic progress was simply not large enough to shield the state financial framework from a dual-pronged external shock.

The sharp contraction in the current account balance is a classic demonstration of a macroeconomic tug-of-war, where Al-Obaidy identifies two severe external factors that completely neutralized domestic gains.

Crude oil remains the fundamental financial lifeblood of the country, directly funding roughly 94% of the national budget. Al-Obaidy notes that even as Iraq successfully diversified its trade via refined oil products, the value of its primary commodit faced downward pressure on the global market during 2025. Because the absolute volume of Iraq’s foreign currency inflows relies on global oil baselines, a drop in crude prices automatically slashes billions from state revenues, triggering the 21% collapse in the trade balance.

While the government successfully restricted the importation of physical goods, it faced an escalating financial drain on the services side. The services account tracks capital flowing out of Iraq to pay foreign entities for essential logistical operations. According to Al-Obaidy, this deficit expanded rapidly due to soaring international costs, including:

• Global Shipping and Freight: Higher expenses associated with moving goods into the country amid changing maritime routes.
• Spiking Insurance Premiums: Heightened regional geopolitical risks led international insurers to raise freight insurance rates for shipments heading to the Middle East.
• Foreign Contractual Obligations: Outbound payments for international technical consultants, tourism, and multinational oil field service companies operating inside Iraq.

The fiscal data compiled by Al-Obaidy highlights a persistent structural challenge for Baghdad as the government navigates its 2026 economic policy. When global resource prices dip and international logistics costs rise, local spending cuts and refined product sales are statistically insufficient to stabilize the broader macroeconomic balance.

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المصدر: Iraqi News