Baghdad: An economist has raised concerns over Iraq’s spending capacity, stating that while salaries for state employees are available, the country has reached its maximum budgetary spending capacity.

According to National Iraqi News Agency, Economist Dhirgham Muhammad Ali emphasized that although the salaries for state employees are secured even with the current oil prices, they consume a significant portion of the national budget, which in turn restricts opportunities for development. In a statement to NINA, Muhammad Ali noted that employee salaries remain a priority because they are a crucial economic driver for Iraq’s rentier economy. These salaries serve as a key engine for the Iraqi market, with the majority of oil revenues being allocated to sustain the productive capital cycle. However, this cycle faces limitations due to the significant imbalance in Iraq’s trade balance, which leans heavily towards imports.

Muhammad Ali also warned that statements fueling concerns about salary payments could disrupt market equilibrium. Such concerns could lead to economic contraction by prompting individuals to hoard money, which would slow down and weaken the capital cycle in the local market. Recent discussions have emerged regarding the government’s challenges in paying state employees’ salaries in the coming months, attributed to increased spending and a recent decline in revenue.