Analysis and Measurement of the Impact of Oil Price Fluctuations on Budget Vulnerability in Iraq (2005-2023) (With Special Reference to the 2023-2024-2025 Triannual Budget)

Abstract

The study aims to shed light on the role of oil in deepening the fragility of the Iraqi economy in general and the public budget in particular. The fragility is analyzed through the impact of oil price fluctuations on the components of the public budget and the per capita GDP. The study also analyzes the risk of financial sustainability in addition to the indicators of fiscal policy solvency and domestic public debt and examines the reality of the triennial public budget. Furthermore, it uses the descriptive analytical method for data on the Iraqi economy and public finance, as well as the quantitative approach represented by econometric tools to measure fragility indicators through stationarity tests and simple linear regression analysis for five econometric models over the study period, which spans quarterly data from 2005 to 2023, adopted from the Ministry of Finance, Planning, the Central Bank, and international financial institutions. The study concluded that heavy reliance on oil has deepened the aspect of fragility by distorting the structure of public expenditures on one hand and public revenues on the other, exacerbating the budget deficit and weakening the performance of fiscal policy in achieving financial sustainability. The results also indicate that there is a significant positive relationship between oil prices and per capita GDP and government investments, and a weak positive relationship with non-oil revenues. Additionally, there is a weak inverse relationship between oil prices and public debt and the budget deficit.

Keywords: Oil prices, public budget fragility, financial sustainability.