The path to recovery and reconstruction in post-conflict Iraq is fraught with pitfalls. The new government will need to tread carefully if it is to maintain macroeconomic stability and fiscal discipline, while trying to address the urgent needs of citizens through improved service delivery, job creation and protecting security gains. As a result, there is little doubt that the government will be forced to expand public spending on essential services, re-open the public sector job market to absorb rising unemployment, and continue to invest in the security sector to ensure that the Iraqi Security Forces are adequately trained and equipped to counter the resurgent threat of terrorism.
Indeed, these necessities will likely be reflected in the 2019 federal budget. The initial draft of the budget that was submitted to cabinet reveals a 23% rise in total spending compared to 2018, while total government revenues are projected to increase by 16% at approximately $90 billion. The number of budgeted public sector employees will also expand by 46,000 people. Given the higher than expected rise in oil prices, it seems that austerity measures will be relaxed to some extent.
Iraq will likely end this year on a budget surplus. The country is now generating nearly $8 billion in oil revenues each month, compared to just over $2 billion in January 2016. According to Ministry of Finance data, a budget surplus of $12.6 billion was achieved by the end of July 2018 and if current trends continue, the surplus could exceed $24 billion by the end of the year.