At a Glance:

• Iraq's internal public debt reached 106.072 trillion IQD (~$81 billion USD) by the end of June 2026, marking a 17.2% surge since late 2025.
• Domestic borrowing climbed by 15.557 trillion IQD in H1 2026 alone to cover government obligations.
• State expenditures outpaced total revenues by nearly 13 trillion IQD through May 2026.
• Direct Ministry of Finance liabilities to the Central Bank of Iraq (CBI) represent the largest share of internal debt, rising to 67.5 trillion IQD.

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Iraq’s internal public debt reached a record 106.072 trillion IQD (~$81 billion USD) at the end of June 2026, driven by a widening fiscal deficit and declining oil revenues. Figures released by the Central Bank of Iraq (CBI) show that domestic borrowing expanded by 15.557 trillion IQD during the first six months of the year alone, as the government relies heavily on local state banking systems to fund public sector salaries, operational costs, and infrastructure projects.

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Key Statements and Focus Area:

• Dr. Mudher Mohammad Salih, Financial Advisor to the Prime Minister:
  "The primary reason for this increase, especially in recent months, is the decline in oil revenues and exceptional circumstances facing public finances, compelling fiscal policy to resort to domestic borrowing. However, nearly 95% of these debts remain within the state banking system, mitigating immediate market contagion risks."

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Central Bank Data & Monthly Growth

Indicator / Period	Total Value (IQD)	Total Value (USD)	Notes
Domestic Debt (End of 2025)	90.515 Trillion	~$69.1 Billion	Baseline debt level entering 2026.
Domestic Debt (End of June 2026)	106.072 Trillion	~$81.0 Billion	Total internal public debt recorded by CBI.
H1 2026 Net Expansion	+15.557 Trillion	+$11.9 Billion	17.2% overall growth over six months.
Single-Month Increase (May–June 2026)	+2.893 Trillion	+$2.21 Billion	Accelerated monthly borrowing rate (+2.8%).

Fiscal Deficit Drivers & Debt Structure

CBI data through May 2026 illustrates the structural imbalance driving government borrowing. Total state revenues stood at 33.747 trillion IQD against public expenditures of 46.697 trillion IQD, generating a net fiscal gap of approximately 12.95 trillion IQD (~$9.9 billion).

To bridge this gap, the Ministry of Finance has heavily tapped domestic instruments.Direct liabilities owed to the CBI account for 67.499 trillion IQD, while commercial bank loans (18.964 trillion IQD), government bonds (10.867 trillion IQD), and treasury bills (8.742 trillion IQD) constitute the remaining liabilities.

FYI

The rapid rise in domestic debt underscores Iraq's vulnerability to global energy price shifts and rigid public spending commitments. While housing the bulk of debt within state-owned banks insulates the economy from external debt defaults, financial analysts warn that relying on central bank liquidity to cover operational expenses threatens monetary stability and restricts capital available for long-term private sector investment.

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