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Original Research
PAGE NO.
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DOI
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SUBMITED
08 January 2025
ACCEPTED
20 February 2025
PUBLISHED
10 March 2025
VOLUME
Vol.05 Issue03 2025
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of the creative commons attributes 4.0 License.
The Importance of Using
Fiscal Policy Tools to
Address Oil Price Volatility
Atheer Abdullah Oliewi
Imam Alkadhum Collage, Dhi Qar, Iraq
Abaas Asfore Lafta
Faculty Of Administration and Economics, University Of Kufa, Iraq
Ali Kamil Baiwy
Faculty Of Administration and Economics, University of Kufa, Iraq
Abstract:
The Iraqi economy is one of the prominent
rentier economies, as it depends largely on oil sector
revenues as a major source of hard currency. This has
resulted in a set of impacts on the general economy, as
the growth of public revenues in the federal budget of
the state and the gross domestic product depends on
the fluctuations of crude oil prices in the global market,
which in turn affects oil revenues. In addition, these
fluctuations directly affect the management of public
spending by the state, making it difficult to reduce it.
There is still an ongoing debate about the causes and
motives of these fluctuations. Accordingly, the Iraqi
government faces great difficulties in preparing the
state's general budget, if there is a decrease in oil
revenues. Hence, the necessity of diversifying sources of
public revenues in the federal budget and supporting
and developing other economic sectors in Iraq that are
suffering from an almost complete halt at the present
time, and benefiting from them in financing the general
budget revenues, in addition to getting rid of or
reducing dependence on oil sector revenues.
Keywords:
The general economy, the Iraqi government
faces great difficulties, economic sectors, oil sector
revenues.
Introduction:
Given the acceleration of trade, the
consequences of globalization and technological
progress, these countries have become more interested
than ever in increasing their competitiveness. Fiscal and
monetary policies play an important role in determining
competitiveness to overcome market failures and
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achieve balance in light of fluctuating oil prices. The
role of monetary policy has increased in most
economies of the world, as it plays a role in controlling
the existing imbalances in the financial and money
markets, which has a significant impact on the stability
of the general level of prices and interest rates, as well
as on oil prices. Oil is a resource that is an important
source of energy in the world, and a strategic product
that is distinguished from other products because it is
a basic factor in global economic growth and plays an
important role in the economic development of
countries, as it is the most important and effective
source of energy. The global economy is characterized
by instability, which negatively affects the economies
of rentier countries that produce and export crude oil,
which depend mainly on the revenues of the oil sector
to finance various other non-oil sectors. Therefore, this
issue represents a major challenge for those
responsible for fiscal and monetary policy, as it limits
the possibilities of changing this policy, especially since
the level of revenues Public expenditures are not
determined on the basis of local economic activity, but
rather depend on external factors and economic
development that decision-makers cannot control. The
Iraqi economy is a rentier economy in the true sense of
the word, as the Iraqi economy’s dependence on oil
sector revenues as a primary source of hard currency
leads to a number of macroeconomic effects that
cause an increase in state revenues in the general
national budget and in the national product.
Importance of the Study
The importance of the oil issue and financial and
monetary policy, as it is one of the issues that concern
the state due to its great importance in various
political, economic and social fields. Moreover, the
Iraqi economy is classified as a one-sided rentier
economy, and depends almost entirely on oil sector
revenues to finance a large part of the general budget
and gross domestic product.
Problem of the Study
The research problem is represented in the importance
of the speed of response of fiscal policy and monetary
policy in the Iraqi economy in light of the instability of
global oil prices, and the impact of this situation on the
performance of the Iraqi economy represented in its
impact on fiscal policy as well as the performance of
monetary policy.
Hypothesis of the Study
The research is based on the hypothesis that the Iraqi
economy has been completely dependent on oil
revenues for four decades, and that any decline or
change in oil prices constitutes a strong shock to the
Iraqi economy.
Objective of the Study
To learn about the effectiveness of fiscal and monetary
policy in solving economic problems and imbalances
and how to use fiscal and monetary policy tools in Iraq
to ensure economic and financial stability and balance.
Chapter One
Monetary Policy and Fiscal Policy: Role and
Effectiveness
1-Monetary policy means: It is one of the main policies
in which government authorities regularly influence the
market economy, and affect the pace and direction of
comprehensive
economic
activity
(1:
2000,
M.Friedman). Based on the basic concepts presented
about monetary policy, it can be defined as "an
instrument consisting of a set of measures and methods
that affect the quantity of money and interest rates and
thus affect the level of economic activity. Monetary
policy indicators show the economic objectives that the
monetary authority, the central bank, wants to achieve.
These objectives depend on the monetary authority
tools that the central bank uses to achieve its main goal,
which is to maintain the price level and the value of the
currency. In order to clarify the main tools, they are
divided into two sections, which are indirect
quantitative tools and direct qualitative tools.
For indirect quantitative tools:
There is a combination of tools used by monetary
authorities and included in this formation, through
which these authorities rely on market forces. The
intention is for these tools to affect other variables and
achieve the desired goals by providing an important role
for market forces in this regard. This classification
includes tools such as open market operations, discount
rate, legal reserve ratio, and buying and selling foreign
currencies (Fahmy, 2006: 15) as follows:
1. Open market operations
The central bank uses open market operations as a
means of changing the amount of cash reserves held by
commercial banks, and thus affecting the amount of
loans and credit granted by these banks. When the
central bank wants to increase cash reserves, it buys
securities from the markets, and when it wants to
reduce cash reserves, it sells these securities, and thus
affecting the creation of credit according to the
country's economic conditions, whetherIt was a
recession or inflation, so central banks should own an
appropriate amount of government bonds for this
purpose. Open market operations are one of the most
effective monetary policy tools in developed countries
that have rapidly growing financial markets (Al-
Shammari and Al-Shammari, 2017: 77). When the
central bank buys securities, this means that it increases
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the percentage of cash in banks’ reserves, and thus
gives them more money to lend, and this is what is
called expansionary monetary policy. When the central
bank sells securities, this leads to adding them to the
general bank balance sheet to reduce the amount of
cash in it, and this reduces the bank’s resources and
thus reduces lending operations, and this is what is
called contractionary monetary policy (Qantji, 2020:
272). Many European countries have used this policy
because it has a direct and indirect impact on the
markets and plays a role in controlling monetary policy
and addressing financial crises (14: 2006, Jan)
2. Rediscount rate
This refers to the process by which the central bank
writes off commercial bank securities at the discount
rate, with the aim of obtaining new cash reserves that
are used to grant loans and credit to individuals and
institutions that deal with the central bank (Bishishi
and Majlakh, 2018: 4).
When the central bank wants to increase available
cash, it should reduce the interest rate to encourage
banks to borrow more from the central bank, and thus
increase their ability to influence the cash in
circulation. Conversely, if the central bank wants to
reduce available cash, it should increase the interest
rate it charges banks, which hinders their ability to
borrow from the central bank and thus reduces their
ability to create credit (Al-Afandy, 2018: 490).
Therefore, when the central bank decides to change
the interest rate, it should clarify the reasons and
motives behind this change, without leaving the
matter to false speculation, as this may lead to
misunderstanding and undesirable results (Manahi,
2012: 111).
3. Legal reserve ratio: It is a percentage of the total
deposits that commercial banks keep in the form of
liquid money after the central bank imposes it on them
according to certain conditions, and this percentage is
known as the legal reserve ratio, which has become a
toolLegal reserve is one of the tools used by monetary
authorities, represented by the central bank, as a
means to reduce inflation or recession, although its
beginning was to protect depositors from the risks
resulting from the misuse of money (Morsi, 2017: 496)
The central bank follows a contractionary monetary
policy when the country is experiencing economic
inflation, by raising the legal reserve ratio to reduce the
ability of commercial banks to grant loans, which leads
to a decrease in the money supply and thus reduces
inflation. On the contrary, when the central bank
follows an expansionary monetary policy when there is
an economic recession in the country, this policy works
to reduce the legal reserve ratio, which increases the
reserves prepared for lending to commercial banks,
which increases their ability to grant loans and financial
investments, and this leads to an increase in the money
supply to encourage economic growth (Shadhan, 2016:
523).
Second. Direct qualitative tools:
The indirect quantitative tools in monetary policy aim to
influence the total credit volume, however, this may
have a negative impact on some economic activities that
the state aims to encourage or reduce, so the Central
Bank uses direct qualitative tools to influence the
direction of credit and not just its volume. These tools
can be represented as follows:
1. Credit framing policy is concerned with monitoring
the activity of commercial banks and influencing the
money supply and granting loans by the Central Bank.
The policy includes setting limits for the development of
loans provided by commercial banks and implemented
by monetary authorities according to direct
administrative plans and determining specific ratios
during the year (Barkani, 2017: 167).
2. Determining the borrowing margin refers to the
percentage of the value of securities provided by the
commercial bank as loans to investors. The goal of
determining the borrowing margin by the Central Bank
is to protect bank loans from price fluctuations in the
stock exchanges, as well as to put an end to speculative
operations in the markets that take place through
dealing in securities (Abdul Moneim and Al-Essa, 2004:
374).
3-Contingent import deposits: Monetary policy requires
importers to pay a mandatory amount of money to pay
for their imports at the central bank in the form of a
deposit for a limited period. Since importers are often
unable to freeze their money, they resort to bank loans.
This tool will reduce the volume of loans and increase
the cost of imports in the rest of the economy. If these
import deposits increase, they will contribute to
reducing the pool of cash. These subsequent receivables
for import deposits will expand cash liquidity (Mokhtari
et al., 2021: 217).
The concept of fiscal policy:
Fiscal policy:
is derived primarily from the French word
"Fisc" which means treasury or money, and there is no
specific definition of fiscal policy. The definition
depends primarily on the goals and functions achieved
by fiscal policy, and on the time periods and economic,
social and intellectual conditions to which this type of
fiscal policy is exposed. Its concept varies from one
country to another, based on the country's economic
system and its level of economic development (Ayeb,
2010: 93).
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Fiscal policy is generally defined as direct intervention
by the financial authority with the aim of influencing
economic activities in a way that ensures an impact on
the national product, income levels and consumption,
through the use of effective fiscal policy tools such as
public revenues and public expenditures (Colander,
2010: 260).
It is also known as a set of measures taken by the
government to control public revenues or taxes with
the aim of achieving the desired goals and avoiding
undesirable effects on income, production and
employment (Al-Ashqar, 2007: 33). While the banking
expert at the Federal Reserve (Samuelson) defines
effective fiscal policy as: “A set of interactions and
measures related to taxes and public spending with the
aim of reducing economic fluctuations, increasing
growth rates, and correcting the course of economic
and social development” (Al
-Dawi, 2016: 239).
Characteristics of fiscal policy:
Fiscal policy has multiple characteristics, which can be
summarized as follows: (Kanaan, et al., 2011: 227)
1. Fiscal policy is a set of procedures and measures
issued by the government in the form of financial laws
and decisions, with the aim of enhancing the financial
interest of the state.
2. The state has the authority to use its power to take
adequate and appropriate financial measures that are
imposed on both the public and private sectors.
3. It is necessary for the government to set its policies
according to the economic situation it faces. For
example, in periods of prosperous economic growth,
tax collection increases, while in periods of economic
recession, public spending increases.
4. There are many means of fiscal policy, such as public
revenues, public expenditures, loans and aid that the
state uses to address a specific problem, in addition to
each stage having its own appropriate means.
5. Financial tools in politics have an impact on all
economic variables. For example, we find that taxes
reduce income while public spending secures new
income.
The importance of fiscal policy:
Fiscal policy is of great importance in every country,
whether developed or developing. The importance of
fiscal policy in developed countries is to maintain the
full employment rate and achieve economic growth. As
for developing countries, its importance lies in the
following (3-2: 2010, Popa & Codreanu):
1. Mobilizing resources: Economies in developing
countries are characterized by low levels of income
and investment, and these levels are linked to a vicious
circle that can be successfully broken by collecting
resources in an optimal way for investment.
2. Accelerating economic growth: The government's
mission was not limited to collecting resources for
investment, but also directing those resources towards
investment channels, and as a result the return will be
higher and there will also be social acceptance of the
goods produced.
3. Seeking to reduce the gap between income and
wealth to the lowest possible degree: The importance of
this is represented by taking advantage of fiscal policy
tools to distribute income fairly in favor of poor social
groups, and this is done by spending the revenues
resulting from social welfare activities.
4-. Increasing employment opportunities: This
importance is shown in developing countries by
exploiting tax incentives through providing tax
reductions, with the aim of promoting the growth of
industries that are characterized by high employment
potential.
5. Price stability: This is done by using financial tools to
control the increase and decrease in economic activity
in a specific country.
The second section: Analysis of the reality of financial
and monetary policies:
Public revenues have declined since the beginning of the
nineties of the last century, due to the second Gulf War
and economic sanctions, as well as the disturbances and
chaos that came after the war in the political, social and
security fields. This decline in public revenues
continued, and after the state's persistent effort, it was
able to work with the memorandum of understanding
and resumed the export of crude oil, and thus public
revenues increased, and this reflects the unilateral
(rentier) aspect of the Iraqi economy. The development
of public revenues during the study period will be
clarified by using ).
As public revenues in (1990) amounted to (8.5) billion
dinars, and the ratio of public revenues to the gross
domestic product reached (15.31%), and then those
revenues declined to (4.3) billion dinars in (1991), and
the growth rate was negative (49.41-%) in that year, and
the Gulf WarThe second is the main reason for this
decline, as well as the political events and chaos in the
country that led to a decline in oil revenues and then a
decline in public revenues.After the year (2003)
revenues increased significantly, and the main reason
for this increase is that oil revenues increased
significantly, and thus we see that Iraq has a unilateral
nature to its rentier economy, and we will explain the
development of these revenues.In the year (2003) and
after the third Gulf War, the public revenues in the
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country increased to (2146) billion dinars and the
growth rate for that year reached (8.87%), and also the
ratio of public revenues to the gross domestic product
in that year increased to (7.25%) due to the increase in
oil revenues. Also, public revenues increased in the
year (2004) to (32982) billion dinars, and the growth
rate for that year reached (1436.90%), and also the
ratio of public revenues to the gross domestic product
in that year increased to (61.95%), due to the
noticeable increase in oil prices and crude oil exports,
and then the increase in public revenues in Iraq. Public
revenues continued to increase during the period
(2005-2007) with fluctuating growth rates, rising and
falling, reaching (22.8%), (21.11%), (11.29%), as its
percentage of the gross domestic product decreased to
(48.98%) in (2007) after it was (55.08%) in (2005).
Public revenues in (2008) reached a level that
exceeded the size of public revenues achieved in
previous years and reached (80252) billion dinars with
an annual growth rate of (46.98%), and the percentage
of revenues to the gross domestic product reached
(51.10%), and that all these increases in public
revenues were mainly due to the increase in oil
revenues. As for the year (2009), public revenues
decreased to (55209) billion dinars, with a negative
growth rate of (31.20-%), while the percentage of
those revenues to the gross domestic product declined
significantly this year, reaching (42.25%), and the main
reason is due to the global crisis in the year (2008). In
the years (2010-2012), public revenues returned to
rise, reaching (69521), (99999) and (119869) billion
dinars, with varying growth rates (25.92), (43.83),
(19.87)%, while the percentage of those revenues to
the gross domestic product increased to (42.89%,
46.01 and 47.15), and the reason is the return of the
rise in oil prices and then the rise in public revenues.
Public revenues decreased in the years (2013 and
2014) to (114090) and (105387) billion dinars, and the
growth rate was negative, reaching (-4.82%) and (-
7.62%), and the ratio of revenues to the gross domestic
product decreased to (41.70%) and (39.56%), due to
the rapid decline in global oil prices, and then the
decline in oil revenues, which led to a decline in public
revenues.
In the years (2015 and 2016), there was a decreasing
decline in growth rates, reaching (36.92% -%) and
(18.14% -%) respectively, and the size of public
revenues reached (66470) billion dinars for the year
(2015) and (54409) billion dinars for the year (2016).
The main reason for this decline is due to the
deterioration of the oil situation and the collapse of its
prices at the end of the year (2014), in addition to the
worrying security situation that prevailed in that year
and the repercussions of the financial crisis, which led
to a decrease in the percen
tage of oil revenues’
contribution to the lowest rate during the study period
in the year (2015), as the percentage reached (77.2%) of
the size of public revenues. The improvement in crude
oil prices and the increase in the global demand for oil
led to an increase in public revenues during the years
(2017, 2018 and 2019), as it reached (77336) billion
dinars in the year (2017). The growth rate is (42.13%),
and the ratio of public revenues to GDP was (37.24%).
Public revenues increased in (2018) to (106570) billion
dinars, with a growth rate of (37.80%) and its
percentage of the GDP reached (42.70%). As for (2019),
the size of public revenues was (107567) billion dinars,
with a growth rate of (0.93%) and its percentage of the
GDP was (42.27%). As for the year (2020), public
revenues decreased to (63200) billion dinars, with a
negative growth rate of (41.24-). In the year (2021),
public revenues increased to reach (320142) billion
dinars, with a revenue growth rate of (406.55%). In the
year (2022), the size of public revenues was (300220)
billion dinars, with a negative growth rate of (6.22-), and
the percentage of public revenues to the GDP for this
year amounted to (127.99). Through the previous
analysis and from Table (6), we note that public
revenues depend mainly on oil revenues to finance the
general budget of the state, which is considered a
unilateral rentier state, as fluctuations in crude oil prices
will significantly affect oil revenues, which in turn affect
the state’s general revenues.
Second: Monetary policy performance:
Iraq witnessed radical changes in the political and
economic system in 2003, as a result of the major
transformation in the Iraqi economy and its shift
towards a market economy. This necessitated a major
change in monetary policy to keep pace with the new
trends of the Iraqi economy. The monetary authority
established a set of rules and took many measures with
the aim of enhancing economic and monetary stability
and creating an economic environment based on the
supply and demand mechanism. Therefore, the main
goal of the Central Bank was to maintain price stability
and build a competitive financial system based on a
market economy. Accordingly, the Central Bank works
to enhance sustainable growth. One of the most
important measures taken by the authority was to grant
the Central Bank of Iraq its independence in accordance
with Law No. 56 of 2004, which recognizes the right of
the Central Bank to make its decisions, and confirms
that it will not lend to the government or a state-owned
entity directly except in the case of purchasing
government papers through open market operations.
(Al-Mashhadani and Al-Tama, 2012: 137). After 2003,
the Central Bank implemented new tools and
mechanisms that differ from previous practices. This
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change is due to several Reasons.
(1)- The independence that the Central Bank gained
according to the new law.
(2)- After oil revenues had stopped since the beginning
of the nineties as a result of economic sanctions, Iraq
returned to obtaining foreign resources represented
by revenues from exporting crude oil.
(3)- Printing a new Iraqi currency, and unifying the
monetary categories (the dinar) with unified
specifications, and this currency is used throughout
Iraq.
These reasons contributed to creating the appropriate
conditions for implementing the new monetary policy
with the aim of starting to achieve the goals set for it.
(Al-Khazraji, 2006: 3)
The Central Bank also tried to use many indirect and
innovative tools in addition to its traditional tools, in
order to strengthen its monetary policy. These tools
are represented in the following points:
The (existing facilities) that came into effect in mid-
2004 were implemented with the aim of providing
security for banks to manage their excess liquidity at
moderate interest rates, in addition to regulating the
levels of liquidity in commercial banks and facilitating
their management. It also aims to activate the interest
rate mechanism in the absence of advanced financial
markets, and encourage commercial banks to deal
more widely with each other and not only with the
Central Bank. (B) - The (foreign currency auction dollar)
was introduced by the Central Bank as one of its
indirect tools in its monetary policy. This tool was first
used on (October 4, 2003) and is still being used to
date. The aim was to put an end to the excessive
increase in the money supply and control the volume
of general liquidity by controlling the monetary base.
Then, achieve stability in the value of the local currency
by defending the balanced exchange rate. In addition
to unifying foreign exchange rates and working to
achieve a balance in the exchange market mechanism
by meeting the market demand for foreign currencies
and meeting the needs of the private sector to finance
all imports needed by the Iraqi market and raising the
purchasing power of the Iraqi dinar and improving the
real value of income. As for commercial banks, this tool
provides them with foreign currency resources and
enables them to open letters of credit and guarantees
and carry out transfers of amounts in foreign
currencies. (Al-Ghalbi, 2017: 33-34). Regarding the
financial sector, especially interest rates, the Central
Bank announced on March 1, 2004 that it would no
longer determine the interest rate charged and paid by
banks and financial institutions to their clients. The
Central Bank also allowed foreign banks to operate
inside Iraq and cooperated with the Ministry of Finance
to restructure Rafidain and Rashid Banks on the financial
and administrative levels. The Central Bank of Iraq was
modernized and reorganized in accordance with the
objectives of monetary policy. The Ministry of Finance
rescheduled the internal public debt owed to the
Central Bank of Iraq, as it will pay off the debts
accumulated during the nineties in annual installments
and with an annual interest of (5%). (Al-Mashhadani and
Al-
Ta’ma, 2012: 137). Among the main measures taken
by the Central Bank to control the money supply was the
issuance of a new currency to replace the old currency
and with new specifications to reduce counterfeiting,
which helped increase individuals’ confidence in the
currency. The policy of liberalizing the interest rate also
greatly helped increase the ratio of current deposits to
the total money supply and increased individuals’
confidence in the banking sector due to the stability of
the currency value.These developments also led to the
stability of monetary demand and the elimination of the
phenomenon of changes in the exchange rate of the
Iraqi dinar against other foreign currencies (Ghaidan
and Hama, 2015: 8). In 2006, the Central Bank of Iraq
increased the interest rate to 16% in order to control the
flow of cash from individuals. However, this measure
had negative effects on the private sector and investors
retreated from borrowing due to the high interest rate.
In 2008, the Central Bank decided to reduce the interest
rate to 15% as a result of the improvement in the value
of the Iraqi dinar against the US dollar and through the
currency selling window. It also reduced the interest
rate again in 2009 to 14% due to the decline in the
inflation rate. The interest rate was reduced to 6% in
2010 and then to 4% in March of the same year, in order
to stimulate economic growth and provide credit for
private sector activities (Central Bank of Iraq, Economic
Report for 2016). Regarding the exchange rate, the
Central Bank of Iraq implemented a policy that included
its intervention in the exchange market starting in 2005,
after adopting the floating exchange rate system. The
bank used a tight monetary policy by selling the dollar in
order to confront the hyperinflation that reached very
high rates after 2003 as a result of the deterioration of
the value of the Iraqi dinar against other foreign
currencies. This resulted from the "open door" policy
adopted by the occupation forces administration, which
led to a reduction in the purchasing power of money for
individuals and the government. Thanks to the presence
of foreign exchange reserves in the Central Bank of Iraq,
its policy of intervention and maintaining the official
dinar exchange rate and its proximity to the parallel rate
was affected. It is worth noting that these reserves came
from the increasing revenues of oil exports and not as a
result of real economic operations. (Al-Halfi, 2012: 53)
This came about due to the rise in oil prices in global
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markets, which reached more than (100) dollars per
barrel. Monetary policy in 2014 faced major challenges
in order to achieve economic and financial stability and
enhance the development process in Iraq, especially in
light of the deteriorating security situation and political
instability that greatly affected the effectiveness of the
monetary authority's tools used. Therefore, the
monetary authority seeks to activate its tools by
encouraging investment, especially by continuing to fix
the interest rate at (6%) annually in 2014, which is one
of the tools that can confront hyperinflation, and
which contributed to providing a suitable environment
to enhance the credit activity of the public banking
sectorPublic and private sectors and enhance their
ability to stimulate economic activity. The interest rate
on bank deposits in effect in 2014 was reduced from
4% to 2% and then to 1%.
In 2015, monetary policy was characterized by a clear
contraction in money circulation (M2), mainly due to
the decline in net foreign assets as a result of the
decline in oil revenues. However, monetary policy
succeeded in overcoming the state of recession and
contraction that the Iraqi economy was suffering from
at that time. (Al-Shandi and Abdul-Khader, 2016: 10)
It is worth noting that the exchange rate of the local
currency against the dollar did not change and
remained stable for many years. Table (2) shows the
development of money supply in Iraq for the period
(2003-2022).
The year 2003 witnessed a continued increase in
money supply, as the volume of local liquidity reached
6953 billion dinars at a high annual growth rate, which
is the highest growth rate in this period, reaching
80.50%. The reason for this was the desire of
individuals to keep their cash balances in banks or
increase those Balances to avoid security risks, and also
to avoid the cost of replacing the currency. The years
2004 and 2005 witnessed a continued increase in the
money supply, but at decreasing growth rates,
reaching 76.24% and 19.38% respectively. This decline
in the growth rate of the money supply caused the
Central Bank to seek to confront inflation after the
issuance of its Law No. 56 of 2004, which gave it
independence in managing its monetary policy. (Saleh,
2012: 2)
Section Three: The most important results and
recommendations
1- Government spending increased year-on-year as a
result of higher oil revenues. Money supply increased
by 50% in 2014 compared to 2010, thanks to increased
monetization of oil revenues by the Ministry of Finance
to meet its current and investment spending needs. In
2015, as a result of lower crude oil prices, public
revenues declined significantly, and government
spending was negatively affected.
2- The money supply increased slightly, reaching about
(92857) billion dinars, with a growth rate of (2.64%). In
(2019), the money supply recorded a decrease
compared to (2018), reaching about (10344) billion
dinars, with a negative growth rate of (89.15-%),
compared to (95390) billion dinars in (2018), when the
growth rate was (2.72%).
3- The exchange rate achieved a high growth rate of
(2.05%) in the year (2015) as the exchange rate recorded
(1190) and the exchange rate remained at this level until
the year (2020), while the exchange rate rose to (1474)
in the year (2021) with a positive growth rate of
(23.86%), and declined slightly in the year (2022) as it
recorded (1460) with a negative growth rate of (0.94-%).
4- Public revenues have declined since the early nineties
of the last century, due to the Second Gulf War and
economic sanctions, as well as the disturbances and
chaos that followed the war in the political, social and
security fields. This decline in public revenues
continued, and after the state’s persistent effort, it was
able to work with the memorandum of understanding
and resume the export of crude oil, and thus public
revenues increased, and this reflects the one-sided
(rentier) aspect of the Iraqi economy.
RECOMMENDATION
1-Pay attention to the vital oil sector, which is the main
nerve of government revenues, in addition to being the
main financier of all government operations, as it
constitutes a percentage of up to 63% of the gross
domestic product, and also represents more than 93%
of the size of the federal general budget revenues.
2-Developing plans to bring the Iraqi economy to high
levels by creating sectors that support the oil sector, to
ensure obtaining new revenues that support the idea of
economic diversification and to activate the dormant
sectors (the agricultural sector, the industrial sector and
the services sector).
3-Continuing government efforts through preparing
plans to ensure the integration of economic sectors by
focusing on the services sector, which has become a
fundamental pillar in most global economies.
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