Fiscal Sustainability Trends in the Iraq Economy

The decline in oil resource flows to below the levels of public budgets in oil countries has exacerbated government deficits and high public debt rates. The new fiscal reality requires reconsidering the design of public finances to isolate oil flows from the pattern of development and financing, and analyze the ability of the fiscal to meet future sovereign debt without risk of bankruptcy or default. This paper discusses the issue of fiscal sustainability in an oil economy that is fiscally linked to the cycle of boom and bust in the world oil markets. Economic theories and empirical studies were used to analyze the path of sustainability in the oil countries. In order to test the validity of the hypotheses presented, modern models were adopted to test the sustainability of the fiscal situation in the Iraqi economy during the study period. The study concluded that there is a long-term balance between the government revenues and expenditures, which indicates a common integration between the mentioned variables and achieve fiscal sustainability in the long run.