Hormuz Blockade Triggers Salary Delays for Iraqi State Employees

Iraq is facing a severe financial crisis as a blockade of the Strait of Hormuz by Iran has crippled the country's oil exports. Because oil exports account for 85 percent to 90 percent of the national budget, the government is struggling to pay salaries, pensions, and social welfare for a public sector that employs about two thirds of the working age population. Monthly requirements for these payments range from 6.5 billion to 8.2 billion dollars, but monthly income in May and June dropped to between 2 billion and 2.3 billion dollars.

The blockade followed US and Israeli bombings of Iran in late February. Iraqi seaborne crude exports fell by 83 percent in March and reached a 97 percent decrease by May. This has led to salary delays for state employees, including teachers and doctors, and sparked small demonstrations by university staff and Ministry of Electricity employees in early August.

The Iraqi government has denied rumors that salaries would move to a 45 day payment cycle. Officials stated that the country holds 83 billion dollars in reserves, along with gold and non oil income, which they claim can cover salaries for the next 10 to 11 months. However, a report from Oxford Economics suggests that maritime traffic through the Strait of Hormuz may remain below pre conflict norms until at least 2028. Iraqi economist Ali Al Rawi noted that the entire Iraqi economy is now hostage to oil revenues.