Measuring and Analyzing Selected Determinants of Public Debt in Iraq (2004-2019)

Abstract

This study examines the measuring and analyzing selected determinants of public debt in Iraq from 2004 to 2019. It first reviews the major events that led to deterioration of the state’s capacity in preventing risky borrow- ings before the fall of the Ba’ath regime. It then turns to the period under study, and applies the Fully Modified OLS )FMOLS( cointegration framework based on data from the central bank of Iraq. The main results show that public debt has been caused by a mixture of factors including a small share of non-oil revenue, increasing operational expenditure at the expense of investment expenditure by the government, and the ISIS attack. It also touches on the link between sectarianism and public debt, and explores the burden of debt services on ac- cumulating public debt. It concludes that there is always a risk of increasing budget deficit; thus, a proper plan for managing public debt is vital to prevent a debt default.

Analyzing the Importance of the Determinants of Public Debt and Its Policy Implications: A Survey of Literature

“…He considered the purchasing power of money and income as determinants of debt. He also argued that, in exceptional situations, incurring debt to finance extraordinary expenditures could be beneficial by avoiding an excessive burden on the present generation and allowing future generations to share the responsibility of repaying that debt as they experience economic growth (Sanz 1972).…”