Iraq's updated 2016 budget in theory hikes provincial oil payments from $2/B to $5/B. It keeps the KRG's 17%. But the political rift with the KRG and stretched finances, make implementation unlikely. A $45/B oil price assumption is kept from September’s initial draft despite Iraqi oil prices having fallen below $30/B.

Iraq’s economy has been hammered by the twin shocks of the ongoing conflict with Islamic State and the oil-price crash. Oil revenues constitute the...