Iraq faces liquidity crisis as oil revenue plunge delays government salaries

Iraq is confronting a severe cash shortage after oil revenues fell by about 80% following disruptions to exports through the Strait of Hormuz. More than $7 billion has been withdrawn from foreign‑currency reserves this year, and the government is struggling to finance public‑sector salaries and other expenditures.

Officials are weighing short‑term measures such as domestic borrowing, printing additional Iraqi dinars, or using foreign‑currency and gold reserves as collateral for loans. Parliamentary Finance Committee member Dilan Ghafour said the two state‑owned banks, Rafidain Bank and Rasheed Bank, have limited lending capacity and cannot indefinitely cover the financing gap.

The salary delay has affected millions of Iraqis who rely on government pay for daily living, prompting families to cut expenses, postpone purchases and seek temporary borrowing. The crisis underscores the broader fiscal strain caused by the oil‑revenue decline and ongoing electricity shortages.