For four months, despite an 83 percent decrease in its revenue, Iraq has still been able to cover its monthly expenses; above all, seven trillion Iraqi dinars (about $5.3 billion) for wage earners, including the Kurdistan Region.
It is true that the delayed return of oil revenue through the national marketer's mechanism, the State Organization for Marketing of Oil (SOMO), resolved some of the imbalance between revenue and spending during the ongoing war, but what has sustained the Iraqi government financially is the Central Bank of Iraq (CBI) by introducing 43 trillion dinars (about $32.6 billion). This was done by injecting newly printed money and reducing the reserves it had accumulated over two decades.
According to data from the federal oil ministry and SOMO, the combined oil revenues of Iraq and the Kurdistan Region over the past two months still do not reach one-third of a single pre-war month's revenue.
Data shared by SOMO show that in May and June 2026 (61 days), total revenue stood at $2.33 billion, whereas in just the 28 days of February, it was $6.8 billion. This is despite the fact that 17 to 24 percent of the revenue reported by SOMO goes to foreign companies operating in Iraq. In other words, over the past two months, Iraq had approximately 2.5 trillion dinars (about $1.9 billion) in oil revenue, but its monthly expenditure was seven times that amount.
Since the beginning of the Iran war in late February, the question that constantly arose was whether the Iraqi government would be unable to cover its expenses, particularly salary expenses, due to the decrease in oil exports and revenue, but now the government is distributing salaries for July 2026. How did this happen, and where did the money originate from?
While many questions linger, four stand out: How can Iraq sustain expenses where 90 percent goes toward operational costs and salaries without sufficient revenue? Why has the dinar appreciated against the US dollar despite increased liquidity injection? Can Iraq live off its foreign reserves, and for how long? To what extent can it continue printing dinar currency (from 50,000 to 250 dinar notes) for the market?
Expenditure amid appreciation
In the first half of this year, Iraq's monthly expenditure roughly mirrored that of last year. Finance ministry data puts total expenditure for the first five months at 46.69 trillion dinars (about $35.35 billion), projected to reach approximately 55.56 trillion dinars (about $42.07 billion) over six months - on par with the 56.7 trillion dinars (about $42.92 billion) spent in the first half of last year.
In contrast, total revenue for the first six months of last year stood at 62 trillion dinars (about $46.94 billion) - 57 trillion oil (about $43.15 billion), five trillion non-oil (about $3.79 billion) - whereas in the first half of this year, it barely reached approximately 35.56 trillion dinars (about $26.92 billion) - roughly half of last year's figure.
Iraq sustained these expenses by utilizing reserves, issuing new currency into circulation, cutting operational and investment spending, and attempting to recover billions of dinars and millions of dollars hidden in barrels, cans, walls, and pits - as seen in Operation Dawn and the case of Adnan Al-Jumaili, former deputy oil minister for refining affairs, who was awarded “Best Manager of the Year" by the former Iraqi prime minister and oil minister just last year.
The answer to the second question - why the dinar has appreciated against the US dollar despite increased liquidity injection - is simple: the Iraqi dinar does not maintain a standard direct relationship with the US dollar, nor does Iraq's currency market react rapidly to bank interest rates and market shifts like Turkey or Iran. Instead, the CBI directly sets and maintains the exchange rate.
By standard economic metrics, injecting excess dinars without backing from production and GDP growth should weaken the currency. However, as observed recently, the dinar's value against the dollar appreciated rather than depreciated.
Statistics show that at the end of last year, total currency printed by the CBI was 99.79 trillion dinars (about$76.14 billion) - 92.56 trillion held in banks, 7.24 trillion outside. By May end, total printed currency reached 113.56 trillion dinars (about $86.66 billion) - 6.75 trillion in banks, 106.8 trillion in circulation outside. Over the first five months of this year, the CBI injected an extra 2.75 trillion dinars (about $2.1 billion) per month. Consequently, the exchange rate dropped from above 157,000 dinars to 149,500 dinars per $100.
Moreover, CBI figures through July 2 show that the US had not sent any cash dollars to Iraq this year, causing foreign cash reserves at the Bank to drop to $84 million before rebounding to over $500 million. By July 16, cash reserves stood at $319 million - meaning the US sent only a single shipment of $500 million in physical cash to Iraq up to mid-July 2026.
Ultimately, what moves the dollar-dinar market is big merchants and capitalists holding massive reserves of both currencies accumulated over the past two decades, rather than basic supply-and-demand laws or CBI monetary policy alone.
Monetary expansion risks
Iraq's foreign currency reserves have experienced major ups and downs over the past two decades, continuously rising and accumulating until late 2022. At the beginning of 2014, it reached 90 trillion dinars (about $68.49 billion), later dropping to 50 trillion (about $38.05 billion) due to the war on the Islamic State (ISIS), rising to 80 trillion (about $60.88 billion) before COVID, and dropping to 64 trillion (about $48.70 billion) during the COVID era.
At the beginning of 2023, it reached 150 trillion dinars (about $114.14 billion), and now (July 16, 2026) it has dropped to 102.5 trillion dinars (about $78 billion).
Over the past six months or so, since late January through July 16, reserves have dropped by 29.4 trillion dinars (about $22.37 billion) - falling from 131.89 trillion (about $100.36 billion) to 102.5 trillion. If Iraq receives very low income, it can rely on its reserves for at most six more months. Reserves cannot be drawn down to zero; dropping below half of their current level signals national insolvency.
Furthermore, 29 trillion dinars (about $22.07 billion) of these reserves consist of gold - whose value keeps fluctuating with world market prices (losing 6.4 trillion dinars, or about $4.87 billion, in value this year) - while the rest is tied up in financial bonds, which have decreased by 20 trillion dinars (about $15.22 billion) since the start of the year as funds were drawn down.
The CBI’s financial system requires money printing to be backed by labor, production and services - areas where Iraq faces severe structural deficits. Over the past six months, the CBI expanded the currency supply by approximately 13.7 trillion dinars (about $10.43 billion).
The only dangerous consequence of printing money without domestic product (GDP) growth is rising inflation; on April 1 of last year the rate was 0.4 percent and on April 1 of this year it reached 4.7 percent, while last month it reached 3 percent.
If currency printing continues without output-backed revenue, inflation will enter double digits. Commodity price controls will collapse, pushing poverty, unemployment, and financial hardship higher while further undermining real GDP growth.
Iraq's revenues and expenditures in the first half of this year were severely unbalanced. However, the CBI bailed out the government and prevented a liquidity crisis by injecting 43 trillion dinars (about $32.56 billion) into circulation - raising printed currency from 99.79 trillion (about $75.56 billion) to 113.56 trillion dinars (about $85.98 billion) while depleting reserves from 131.89 trillion (about $99.86 billion) to 102.5 trillion dinars (about $77.61 billion).
The budget deficit was covered by printing money and eroding reserves - not through structural reform, revenue diversification, operational cost cuts, productive sector activation, or recovering the trillions lost to corruption. Iraq can likely limp along to the end of this year, however, what it will do next year remains to be seen.
