ERBIL, Kurdistan Region - Iraq's economy showed signs of stabilization in the first quarter of 2025, with inflation dropping by 21 percent and gold reserves seeing a significant increase, according to a report from the Central Bank of Iraq (CBI). This comes as the country grapples with a persistent budget deficit despite rising overall revenues.
The CBI report seen by Rudaw, covering January to March 2025, revealed that the average inflation rate fell to 2.2 percent from 2.8 percent in the last quarter of 2024. “This reduction indicates a decrease in the general price level and an improvement in the purchasing power of individuals and institutions in Iraq,” the report said.
The latter is seen as a good sign for the economy as it means that the cost of goods and services is rising at a slower pace, or even decreasing for some items, thus increasing the purchasing power.
The CBI report also noted a slight decrease in the circulation of Iraqi dinars, down 0.6 percent in the same period, reaching 99.9 trillion dinars (about $76.3 billion) from 100.5 trillion dinars (roughly $76.7 billion) in the final quarter of 2024. This decline, linked to better management of USD oil revenues, is seen as a factor in curbing inflation and stabilizing prices.
Further bolstering economic indicators, lending to the private sector rose by 1.1 percent in the first quarter of 2025, with total credit reaching 44.1 trillion dinars (about $33.7 billion). This increase suggests growing support for private sector projects and a potential diversification of the oil-dependent economy.
Significantly, Iraq’s gold reserves Iraq's gold reserves surged by 19 percent in value, reaching 21.2 trillion dinars (approximately $16.2 billion). This dramatic rise is a positive sign for the country's financial stability and its resilience against economic shocks.
However, the positive economic news is tempered by fiscal challenges.
Iraq’s finance ministry on Wednesday reported revenues of 28 trillion dinars (about $21.3 billion) in the first four months of 2025, a 34 percent increase compared to last year. Yet, expenditures also rose, contributing to a deficit of nearly 900 billion dinars (about $690 million) in the first three months of the year, a 12 percent increase compared to the same period last year.
Oil revenues continued to dominate, accounting for 88.9 percent of total state income. The ongoing deficit, despite higher revenues, highlights Iraq's heavy reliance on oil prices and the substantial spending outlined in its $152 billion federal budget for 2023-2025. The budget, passed in June 2023, had raised concerns about financial stability should oil prices fall below the $70 per barrel threshold set in the legislation.
Iraqi Prime Minister Mohammed Shia’ al-Sudani had previously stated that the record-high budget aimed to address social needs, enhance infrastructure, and foster economic progress.
Hastyar Qadir contributed to this article.
