Baghdad: Prime Minister's Financial Adviser, Mudhher Mohammed Salih, affirmed on Thursday that the government is giving absolute priority to sovereign spending-particularly the salaries of public employees, retirees, and social welfare beneficiaries. He said the government's plan focuses on reprioritizing expenditures to ensure the continued payment of salaries, stressing that the state possesses the necessary tools to maintain salary disbursements despite temporary financial pressures.
According to Iraqi News Agency, Salih emphasized the government's commitment to prioritizing sovereign expenditures, with salaries, pensions, and social welfare at the forefront. He explained that the strategy involves reorganizing spending priorities, postponing non-essential expenditures, and managing available liquidity to ensure uninterrupted salary payments despite temporary financial constraints. Salih noted that the current challenge primarily concerns the timing of revenue inflows rather than a permanent shortage of resources, making effective liquidity management crucial to overcoming the present situation.
He added that the Central Bank of Iraq plays a supportive role in maintaining monetary and financial stability by managing liquidity in the banking sector and providing an appropriate environment to finance government needs through legally available instruments, without compromising its independence or monetary policy objectives. This may include facilitating banks' subscriptions to treasury bills and bonds and improving liquidity management within the banking system to ensure the continuation of essential government spending, while adhering to the Central Bank Law and avoiding direct monetary financing except under exceptional legal circumstances, if applicable.
Salih explained that the government will simultaneously rely on a combination of financial instruments to meet its funding needs, including increasing non-oil revenues, utilizing available Treasury liquidity, domestic borrowing through treasury bills and bonds, and, if necessary, concessional external borrowing. The resumption of normal oil revenue flows remains the most important factor in restoring fiscal balance and strengthening financial stability.
He noted that, if managed within internationally recognized frameworks, these measures are not expected to have a direct impact on the Central Bank's foreign exchange reserves, as those reserves are primarily designated to support exchange rate stability, meet external obligations, and strengthen confidence in the national economy. They are not normally used to finance the government's current expenditures. Should exceptional measures become necessary, they would be implemented in a manner that preserves safe reserve levels and does not threaten monetary stability.
Salih added that the duration of the current crisis depends on how quickly oil revenue flows are restored, global oil prices, regional and international developments, and the efficiency of public financial management. If the issue remains a temporary liquidity shortage, the corrective measures are also expected to remain temporary.
He stressed that these measures generally do not constitute direct lending from the Central Bank to the government. Rather, they involve indirect financing through government debt instruments purchased by banks or through financial market mechanisms. These obligations are repaid upon maturity using public revenues, particularly oil revenues once normal flows resume, or through allocations from the state budget, ensuring that temporary financing does not become a permanent fiscal burden.
Salih noted that no official figures have yet been announced regarding the amount of borrowing the government may resort to, explaining that the required financing will depend on the duration of the liquidity crisis and the level of revenues generated during the coming period.
From an economic standpoint, borrowing should be limited to covering temporary liquidity gaps while maintaining safe levels of public debt and avoiding unnecessary expansion in borrowing beyond what financial necessities require.
He further stated that if prolonged escalation in the Strait of Hormuz were to disrupt or significantly reduce Iraq's oil exports, it would naturally have a negative impact on revenue flows into the Treasury, increasing pressure on public liquidity. Nevertheless, he stressed that such a scenario would not necessarily halt salary payments, as the state has various tools to address temporary crises, including financial reserve management, reprioritizing expenditures, short-term borrowing, and activating domestic debt instruments. However, challenges would grow the longer disruptions persist, making the diversification of oil export routes through regional borders and pipeline networks a strategic priority for strengthening economic security and reducing dependence on a single export outlet.
Salih pointed out that the government's approach extends beyond managing temporary liquidity and financing challenges to adopting broader reform strategies aimed at gradually retiring domestic public debt within a comprehensive development framework. This vision seeks to employ debt instruments and fiscal and monetary policies in ways that support productive investment, enhance the productivity of the real economy-particularly in industry, agriculture, services, and infrastructure-create new jobs, broaden the tax base, and increase non-oil revenues. Under this approach, public debt reduction becomes a result of economic growth and rising GDP and public revenues, rather than merely a financial repayment process, thereby achieving financial sustainability, increased production, higher employment, and a more resilient economy with reduced dependence on oil revenues.
He added that, in line with the strategic dimensions of the government's program and efforts to reshape the productive structure of the national economy, domestic public debt should not be viewed merely as a financial burden but also as a development tool when directed toward financing productive, value-added projects. Such an approach contributes to higher economic growth, greater employment, expanded productive capacity, and increased public revenues, providing the resources needed to gradually retire public debt within a sustainable development path. In this way, domestic debt becomes a driver of investment and production rather than simply a means of financing budget deficits, as part of an integrated economic policy aimed at promoting economic diversification, achieving fiscal sustainability, and improving the efficiency of the national economy.
He concluded by saying that this vision is consistent with the principles of developmental economic policy adopted by many successful international experiences that transitioned from managing fiscal deficits to building productive and sustainable economies by using public financing instruments to stimulate real economic growth rather than merely funding current expenditures.