Global Oil Price Fluctuations and Public Budget Deficit in Iraq

The study aims to examine the impact of global oil price fluctuations on Iraq's general budget deficit, highlighting the relationship between global financial shocks resulting from political instability and Iraq's budget deficit and financial stability in the medium and long term. A quantitative approach was employed in the analysis, utilizing modern econometric methods and relying on the EViews 13 statistical program to conduct the necessary econometric analyses. The study used data collected from the Central Bank of Iraq, the Ministry of Finance, and OPEC to analyze the impact of oil price fluctuations on Iraq's general budget deficit for the period from 2008 to 2024. This data was essential for understanding the relationship between global oil price fluctuations and the state budget. The Autoregressive Distributed Lag (ARDL) cointegration test was employed to examine the relationship between various economic variables, including the Iraqi oil price and the state budget deficit, to determine the impact of oil price fluctuations on the budget deficit. The results indicate that Iraq's general budget, which is mainly dependent on oil revenues, is susceptible to fluctuations in global oil prices. This directly impacts the country's financial stability, the implementation of its spending programs, and the achievement of its overall objectives. The results also reveal a deficiency in adopting flexible financial strategies that can adapt to fluctuations in the oil market. This study fills a research gap by focusing on time-based analysis and examining the problem across four historical periods, a context that has not been well explored. It also provides insights into the general budget, dividing it into multiple oil price scenarios, including optimistic and pessimistic scenarios. This would allow the government flexibility in confronting financial shocks and reduce the deviation gap between the planned deficit and the actual deficit.