The impact of the net public budget and current account on economic growth in Iraq for the period (2004-2023)

Abstract

The research aims to analyze the reality of the net public budget, current account, and GDP in the Iraqi economy for the period (2004-2023), and to explore and analyze the relationship using modern econometric models that are compatible with the available data. The research relied on the deductive approach to present the theoretical foundation, and the inductive approach to identify and interpret the data based on available statistics. Modern econometric tools were also used, using the ARDL methodology using the Eviews 13 program to measure the relationship. The research concluded that there is a long-term equilibrium relationship between the net public budget (NPB), the net current account (NCA), and economic growth (GDP), as proven by the results of a cointegration test using the bounds test methodology. In addition, there is a long-term cointegration relationship between the independent and dependent variables. This can be observed through the error correction parameter (CointEq(-1)) of -0.25, which is significant at a probability level of less than 1%. The study recommends reconsidering the mechanisms for preparing and implementing the public budget, and the need to enhance the accuracy of estimates in preparing the estimated budget and overcome what is known as the "financial illusion." This is achieved by linking the implementation of investment projects to effective oversight procedures and flexible legislative controls that ensure actual spending and the achievement of planned objectives, while reducing the gap between the estimated budget and the implemented budget. It also recommends managing surpluses in the public budget and current account, and directing these realized financial surpluses toward establishing sovereign investment funds or funds for future generations. This will enhance long-term economic stability and reduce reliance on borrowing during times of financial crises or oil price fluctuations.