Research studies

Analysais of the interna public debt and the possibility of financing investment in the environment of the Iraqi economy for the period (2004-2000)  


Prepared by the researcher  

Dr. Nagham Hamid Abdul Khader Al-Yasiri, Wasit University Faculty of Management and Economics

Dr. Rabab Nazim Khazam Al-Akili, Ministry of Oil, Petroleum Products Distribution Company/ Wasit branch

Dr. Kawtar Karim Abdul Razzaq, Wasit University Faculty of Management and Economics

Democratic Arab Center

International Journal of Economic Studies : Twenty-Second Issue – August 2022

A Periodical International Journal published by the “Democratic Arab Center” Germany – Berlin

Nationales ISSN-Zentrum für Deutschland
ISSN  2569-7366
International Journal of Economic Studies


This study aims to diagnose the course of fiscal policy on the size of domestic public debt and public borrowing and to determine the mechanism of public debt expenditure in a way that ensures financial sustainability away from debt accumulation and increase the burden of debt servicing costs, which will have a negative impact on the performance and growth of the economy, which can be diagnosed through GDP and investment, and for the purpose of achieving the objectives of the research the study relied on the analysis of the basic variables of public debt and the extent to which it affects the identification and guidance of public investment, and the study reached  The lack of a relationship between domestic public debt and long-term investment spending, which requires directing the fiscal policy instrument (embodied in public debt) to investments that have an impact on the public budget by filling the fiscal deficit in light of the monopolistic rents of the economy and its reliance on a major source of public revenues embodied in (oil revenues)  It is beyond the control of the economy, which makes the Iraqi economy hostage to external shocks and crises linked to global oil prices, which has influenced the country’s budget strategy as well as growing debt interest and services.


Iraq is one of the rentier countries with a one-sided economy, which depends on the oil sector to finance its expenditures, which is characterized by a significant fluctuation in the prices of its products because of its association with the prices of the world markets, and this volatility is offset by the great neglect of other economic activities and the failure to regulate the revenues it receives from this sector, as Iraq relies on balancing items in the organization of its expenditures, which is one of the oldest budgets used by governments, as this budget allocates public expenditures to various government institutions on the basis of The amounts spent by these institutions in the previous year or years, and the debt is theoretically linked to the public finance science that examines the state’s revenues, expenditures and balance, and this correlation comes from the fact that state debt represents a accumulation of state loans as a type of public income that, together with other types of revenue, constitutes total State revenues, The problems that the government has been experiencing since ancient times due to the disruption of the security and economic conditions in the phase of low world oil prices as well as the low growth rates of sectors and productive economic activities to contribute to GDP after 2009 caused increases in expenditures and reduced imports and due to poor planning and management, which led to a decline in public investment of the state and the failure of public sector projects and the failure of public sector projects and the internal public debt in Iraq during the study period was linked to oil revenues that  It contributed mainly to the bulk of GDP, while there is little impact on public investment and other economic sectors in gdp formation, and the rise in iraq’s domestic public debt after 2013 was caused by increases in the financial allocations of the Ministry of Defence and Interior, as well as “financing of unemployed sectors and economic activities such as industrial and agricultural sectors, electricity sector and others in exchange for lower more productive public investments.

First: Methodology


The problem of research lies in iraq’s economic crises, which are drunk in increasing public expenditures on the one hand and reducing revenues, leading to a budget deficit that is covered by public debt, whether internal or external, as well as the lack of fixed and specific standards of fiscal policy in Iraq, particularly with regard to the optimal size of domestic public debt in a way that achieves financial sustainability, and as a result of which public debt has worsened both (internal and external), This has increased the burden of extinguishing it and has had negative effects on public investment in the country.


Based on the nature of the research problem and in order to achieve its objectives, the research is based on the hypothesis that: The public debt (both domestic and external) in Iraq remains in a dangerous situation and has a negative impact on some variables of economic performance.

Search goal

The research aims to highlight the importance of the relationship between domestic public debt and investment financing by identifying the concept of domestic public debt and analysing the development of its structure in the Iraqi economy for the period (2004-2020).

Second: The theoretical and conceptual framework of public (internal) debt and investment

  Public debt (internal)

Public debt is an important source of public revenue sought by the State when other revenues are unable to finance its public expenditures, and public debt is an official loan, and its definitions appear in the literature of economic and financial thought, defined as a set of amounts to which the State or one of its public bodies adhere to others as a result of borrowing (Shaimaa, 2018) these amounts to finance the deficit in its public budget while pledging to pay this debt with the interests it entails in accordance with the conditions agreed upon by the parties . While the IMF defined it as a group of debts contracted or guaranteed by public agencies that are paid to residents and non-residents (foreigners) in the country and are entitled to payment at a certain date, it is defined by the World Bank as being the full balance of fixed-term contractual government obligations that are payable on a given date, in other words, its coverage of both domestic and external debt, in addition to the Bank’s assertion that external debt is a long-term public debt guaranteed by The government. (Obeid, 2017) Thus, the total public debt, the total amount owed by the Government to the owners of government-issued securities, represents the funds needed to transfer expenditures that exceed and take many forms of income (short-term, medium-term and long-term), while others have defined it as an amount of money collected by the State, both from the external and internal markets, which the Government undertakes to pay with interest and under certain conditions (divided into internal public and external public debt).

  1. The concept of internal religion

Domestic public debt arises when the Government resorts to borrowing from natural and moral persons within the country or residents regardless of their nationality, which is the total public debt held by the Government, official bodies and public institutions towards the national economy of the country, or is what the State owes to its various creditor citizens, when the State borrows at home and issues its bonds at home and in its national local currency and is subscribed to by the nationals of that country and its residents of other individuals or economic units. (Happy, 2004) In this regard, the issuance of domestic debt is based on a range of considerations, including the extent to which  surplus market ornamental savings or surplus to the need for domestic private investment are assessed, and the willingness of these savers to subscribe to loan bonds, as well as the fact that there  is a surplus of market need for savings offset by the willingness of savers to subscribe to loan bonds. Because of the guarantees and benefits provided by the State, provided that it is not less than the prevailing market, the state  is therefore able to maintain the internal balance of the economy while preventing inflation and fluctuations arising  at foreign exchange rates and their money from negative effects on the national economy and thus their impact on the underwriter in this loan. (Shaimaa, 2018)

  1. Components of domestic public debt

A.Treasury transfers (short-term debt):

These are tradable financial values issued by the Ministry of Finance for a short period (less than a year) and are therefore a type of floating debt and are one of the most important loans, which are financial securities accepted by the banking system and some financial establishment while individuals are reluctant to buy them due to low price and short duration, and can be used to cover the deficit in the general budget and the inability to issue long-term loans, and after the passage of the Central Bank Act No. (56) of 2004 commercial banks entered into the process of providing Bids, in accordance with the instructions of the Ministry of Finance, treasury transfers are managed by public bidding in order to achieve the principle of participation with the private sector and pooling savings, and therefore have a direct impact on interest rates in the short term through the sale and purchase of treasury transfers as well as the impact on excess bank liquidity, and there are two main types of remittances:

– Treasury transfers in accordance with the electronic government bond registration system (Gsrs) which have a time of (364) days.

The second is the investment treasury transfers issued for the purposes of financing investment projects and the method of financing them is by direct borrowing, which is intended to finance self-funded public companies and is intended to pay employees’ salaries.

 B-Government bonds (long- and long-term debt):

We can define bonds as securities used by the government as a tool to obtain funds and enhance their liquidity aspect in order to invest them in their allocated channels and are debt instruments that contribute to the provision of funds and for specific periods of time commensurate with the period of time covering their needs, and can be used by banks to influence the offer of cash, while treasury bonds are securities (cheques) to obtain cash flow resorted to by the state with no availability of financial funds and cash liquidity when Need, the state usually issues internal bonds to the lender through auction.


  1. Investment concept

Investment is generally part of the economy that has led to the progress of societies, while developing societies are still open to investment and expanding so that they can catch up with progress and advancement. Investment means that a natural or moral person in a country other than his or her own uses his or her expertise, efforts or funds to undertake economic projects, whether alone, or in partnership with a natural, local or foreign moral person, the State or its citizens in the establishment of a joint venture or project. (Reza, 1994) Investment has been defined as “investing money for the purpose of achieving return, income or (profit)”   (Hardan, 1997).

  1. Investment Tools

 It means that they are the tools used by investors because they have a particular asset, as the investment instruments are large and we can mention the most important according to their importance in the national economy, and depending on their degree of liquidity:

  1. Securities investment: It is one of the most prominent investment instruments available due to its flexibility and the advantages it carries and is in many types, as it varies in terms of return, risk and rights as follows. 🙁 Al-Jubouri, 2015)

– Shares: An instrument that allows the owner to own part of the company’s assets, which contribute to obtaining a share of those returns.

Bonds: It is a debt instrument, as the seller (issuer) of the bond undertakes to pay the amount according to the recorded date and certain interest is calculated in favour of the buyer, as it has the right to trade in the financial market, and the bond differs from the stock in terms of the degree of risk, the shares change their earnings in the change of the company’s production and the return achieved as the risk is higher than the bonds because their income is fixed.

B- Investing in the real estate market: Investment in the real estate market comes in second place after securities in the investment world, and is in two forms:

Direct form: The investor buys real real properties such as buildings and land. Indirect form: The investor purchases a mortgage issued by a real estate bank or participates in the portfolio of a real estate investment fund.

  1. Investing in economic projects: Economic projects are important investment tools and receive the attention of many investors because of the high degree of security, as well as continuous income, and these projects vary between industrial, commercial and agricultural, and investment in economic projects is one of the most widespread types of investment tools because they play a major role in the production of goods, the provision of services, and the employment of a lot of labor.
  2. Investment in the commodity market 🙁 The Central Bank of Iraq, 2011) there are some goods that have special advantages, which give them the power to invest, and have formed their own markets called (stock exchanges) similar to capital markets, The most important of which is the Cotton Exchange in New York, and in Brazil the coffee exchange, and the dealing between investors in the markets through private contracts, which is known as the future undertaking, as it is a contract between the two parties, the first is a producer of the commodity and a agent or broker (brokerage office) where the product is prepared for the broker to deliver a certain amount of goods, and the date is fixed and in return for receiving coverage insurance.

Second: Analysis of the reality of iraq’s internal public debt for the period (2004-2020)

First: diagnosis of the structure of internal debt

  1. Components of domestic public debt

Table 1, which includes the structure of the internal public debt for the period (2004-2020), shows the acquisition of domestic debt over the Ministry of Finance, followed by treasury transfers, while the third place was in favor of loans of financial institutions, while the last place came in favor of the bond instrument, reaching Debt to the Iraqi Ministry of Finance for 2004 (4,683) million dinars, while the total public debt of the Ministry of Finance did not change during 2005,2006 to (5,055.5) million dinars, as is During 2009,2010, it stabilized at 3,955,519 million dinars, due to the postponement of the issuance of quarterly long-term remittances for the rescheduling of the remaining debt to the Ministry of Finance for the Central Bank of 3,955,519 million dinars, In 2013, the debt to the Ministry of Finance decreased to 2,755,519 million dinars due to the payment of the four installments (400) million dinars per year by the Ministry of Finance and based on the agreement on the rescheduling of banking arrangements signed between the Central Bank and the Ministry of Finance on 2 6/10/2010 (1), then the debt in the ministry of finance began to decline gradually and then remained the same during 2015, 2016 to reach (2,355,519) million dinars, after which it declined in 2018 It amounts to (1,955,519) due to the payment of the first installment amount of (200) billion dinars and according to the new agreement to reschedule the remaining debt in the ministry of finance, which is in favor of the central bank, which signed it on 18 July 2016, the commercial bank’s treasury transfers increased from 4,478,530 million dinars in 2009 to (5,225,287), resulting in a rise Domestic debt from (8,434,094) million dinars in 2009 to 9,180,860 in 2010, while treasury transfers decreased in 2011 to a decrease in domestic debt to JD 7,446,859 million, and in 2011 4 Treasury transfers (7,064,500) million dinars resulting from the central bank’s purchase of central treasury transfers (transfers deducted from the secondary market) to pay the salaries of members of self-financing companies, and in 2015 the treasury transfers to commercial banks (13,086,312) million dinars consisting of remittances To cover the budget deficit and treasury transfers for Rafidain, Al-Rasheed and the General Pension Authority as well as loans from the Commercial Bank of Iraq, it witnessed the emergence of bonds and loans of financial institutions as new sources of financing the Iraqi budget deficit after 2014 due to the worsening budget deficit planned at the time, which was reflected in the development and expansion of sources of internal public debt and the loans of financial institutions (10,461,057) million dinars Jd consists of loans from self-financing companies and loans from the Commercial Bank of Iraq to self-financed directorates in the Ministry of Electricity, bonds (1,452,500) million dinars, and in 2017 treasury transfers remained unchanged at (16,069,232) 1 million dinars, as did loans from financial institutions, which also remained unchanged to reach 10,546,233 million dinars, and in 2020 treasury transfers (28,855,423) million dinars remained, while the debt remained on the Ministry of Finance as As in 2019, the 1,555,519 million dinars, as well as the rise in loans from financial institutions amounted to (14,668,508) million dinars, and we note the rise in domestic debt Significantly to 64,2446.6 million dinars from 2019 (40,586,247) million dinars due to the drop in oil prices as a result of the Covid-19 pandemic. With regard to domestic debt, it was characterized by a kind of stability during the first years of the study as the overall budgetary situation evolved and continued fiscal surpluses, reducing the need to issue domestic debt, despite the issuance of the Financial Management and Public Debt Act No. (95) of 2004, so domestic debt ranges from high to low during the period 2004-2013, registering a series of declines from the beginning of 2005 to 2008.

The internal debt of the Central Bank of Iraq to the Ministry of Finance resulting from overdrafts and treasury transfers issued by the Ministry of Finance owned by the Central Bank of Iraq has been rescheduled, and the total public debt at the end of 2005 (6,255,578) million dinars is paid in quarterly installments financed through the issuance of treasury transfers at a price (Except, 2016)

Interest (5%) per annum1, then the domestic debt increased from (4,455,569) million dinars in 2008 to (9,180,860) million dinars in 2010 as a result of the global financial crisis, and then decreased to Lows in 2012 and 2013 due to the financial abundance after the rise in crude oil prices and exceeded $108 per barrel, and after this improvement in domestic debt levels Iraq suffered a double shock represented by the significant decline in world oil prices, as well as the occupation of some areas of Iraq by ISIS and the accompanying This is from the destruction of infrastructure and the theft of public and private banks, and this requires more military and humanitarian spending, that the rise in public expenditures and the decline in public revenues prompted the state to look for alternative and rapid means, the use of borrowing from internal sources was the most appropriate option, which led to a rise in domestic debt from (9,520,019) million dinars 2014 to (32,142,805) and (47,362,251) million dinars in 2015, 2016, respectively, and domestic debt declined during 2018, 2019 as a result of economic and political stability in Iraq to reach (41,100) In 2020, the level of domestic public debt increased to 64,2446.6 million dinars due to lower oil prices and the government’s resort to domestic borrowing to reduce the budget deficit gap under the General Borrowing Act 2020.

Table1Components of Iraq’s domestic public debt for duration (2004-2020)

Treasury transfers with commercial banks Al , Din Al , Din Bond loans Total domestic public debt Years
942,000 Ministry of Finance Institutions (1 million dinars) 2004
120,000 5,137 Finance 5,925,061 2005
251,000 5,393 6,255,578 2006
519,000 5,393 5,307,008 2007
500,000 4,674,7 4,855,324 2008
4,478,530 3,955 4,455,569 2009
5,225,287 3,955,519 8,434,094 2010
3,891,340 3,955,519 9,180,860 2011
3,392,000 3,955,519 7,446,859 2012
1,500,030 3,955,519 6,547,519 2013
7,064,500 2,755,519 4,255,549 2014
13,086,312 2,445,519 1,452,500 9,520,019 2015
16,538,162 2,355,519 1,696,945 32,142,805 2016
16,069,232 2,355,519 2,682,420 10,461057 47,362,251 2017
13,348,7775 2,155,519 19,553189 10,546233 47,678,796 2018
13,378,8755 1,955,519 19,876,546 10,546233 41,822,918 2019
28,855,423 1,755,519 19,165,21 9,501,043 40,586,247 2020


Central Bank of Iraq, statistical site, financial statements, different years.

The Central Bank of Iraq, the annual report, for different years.

 2-Analysis of financial sustainability in the Iraqi economy environment

The term financial sustainability is one of the terms used in fiscal policy and the definition of the term varies according to the intellectual visions of economists, so it can be emphasized that there is no specific agreed concept, as some define it as how the Government can increase the basic surplus not only in the short term but in the long term in such a way that it can cover its current debt. Or sustainability is expressed as a picture of a long-term financing programme in any country. Some frame it as the ability to generate net income capable of coping with accumulated debt and liabilities.1 (Safwat, 2017) Although intellectual and theoretical visions on the term financial sustainability differ and differ as consistent with the measurement of the financial sustainability of any country through a number of indicators, the most important of which is the index of the forgot of domestic public debt to GDP, This indicator is important for measuring the size of a country’s financial sustainability by measuring changes in the size of domestic public debt compared to the size of GDP, as the state’s budget deficit is often covered by internal borrowing from financial institutions, government institutions or individuals, which are internal debts that the state has to meet in the future, the more the state’s debt increases internally the lower its credit position. Put them on early warning of a financial risk. Accordingly, table 2 data show that Iraq suffers from an increase in total public debt, the ratio of the index is also in a state of volatility according to the size of the domestic public debt on the one hand and the size of GDP on the other, the ratio (1.11%) was the flag of 2004 while in 2020 it reached (32.32%), indicating a real problem in the depth of the Iraqi economy and the confusion of its monetary and financial policies, which negatively reflect the economic reality at home and also affect the capacity at home. Credit for banks and purchasing power per capita, but the index fell to 1.6% in 2013, especially after the rise in oil prices, increased oil GDP, increased its contribution to GDP and stabilized the economic situation, but this indicator returned to (1) 6.5%) in 2015 and (24.1%) in 2016, especially after security instability and low oil prices, not to mention a decline in gdp to a situation of decline, especially after the stabilization of the security situation in 2018 and the decline Index to (16.7%),  Due to global health conditions and low oil prices in 2020, the government resorted to domestic borrowing to reduce the budget deficit gap under the Public Borrowing Act 2020 to reach the ratio of public debt to GDP (32.32%).

Table (2)Total public debt to GDP index in Iraq for duration (2004-2020)

Domestic public debt1 million dinars) Growth rate Domestic debt% GDP At current prices



Output growth rate Gross domestic product % Ratio of domestic debt to Gross Domestic Product Years
 5,925,061 532,353,587 2004
5,925,061 5.57 735,335,986 38.12 2005
6,255,578 532,353,587 38.12 1.11 2006
5,307,008 5.57 735,335,986 29.99 0.85 2007
4,855,324 -15.16 955,879,548 16.6 0.55 2008
4,455,569 -8.51 111,455,813 40.88 4.4 2009
8,434,094 89.29 157,026,061 -16.80 2.8 2010
9,180,860 8.85 130,643,200 24.1 6.5 2011
7,446,859 8.9 162,064,565 34.1 5.7 2012
6,547,519 18.9- 217,327,107 17.0 3.4 2013
4,255,549 12.1- 254,225,490 7.6 2.6 2014
9,520,019 35.0- 273,587,529 2.7- 1.6 2015
32,142,805 123.7 266,332,655 26.9- 3.6 2016
47,362,251 237.6 194,680,971 11.25 16.5 2017
47,678,796 47.3 196,924,141 14.6 24.1 2018
41,822,918 0.7 221,665,709 21.31 21.1 2019
38,331,548 12.3- 268,918,879 2.32- 16.7 2020

 Source:  The Central Bank of Iraq, Directorate General of Statistics and Research, has various annual bulletins.

Second: the development of domestic public debt and the debt burden in the Iraqi economy

Table 1 shows that domestic public debt consists of a variety of long-term public debt instruments such as government bonds and short-term debt instruments (treasury transfers), noting that domestic public debt continued to increase throughout the study period, rising from (6061) 1 billion dinars in 2004 to 6,593 billion dinars in 2005, achieving an annual growth rate of 8.77 percent, and the shocks to the Iraqi economy have contributed to the inflation of domestic debt to record Unprecedented and significant growth rates during the double shock (economic and political) phase in 2014, as the war against ISIS, coupled with lower oil prices, contributed to increased public expenditures, particularly military expenditures, offset by a sharp drop in oil prices, which required the use of public debt to finance regular and emergency expenditures, as the period (2014-2015) saw the volume of domestic debt rise from (9,520) billion dinars To (32,142) billion dinars, achieving growth rates of 123.73 percent to 237.62 percent for both years in a row, and subsequent years saw a relative decline in domestic public debt until the economy was exposed A new complex crisis, reflected in the combination of economic, social and health factors for the period (2019-2020), has helped to raise domestic debt again to achieve an annual growth rate of 67.6 percent for 2020. With regard to the debt burden, which can be described as the sum of cash payments made, we meet the abandonment of its funds for a certain period of time, as domestic public debt has two types of burdens: the financial burden, which is embodied in the payment of interest and installments of the debt, i.e. the burden on the public treasury, while the other type of burden is the economic burden and is intended to have an impact on the economy and its benefits and costs on the national economy. (Ismail, 2020) From tracking table data (3) note the development of the debt burden increased from (242.44) billion dinars in 2004 to (1907.12) billion dinars in 2017 as a result of the growing burden of the internal year increased total public debt, as total domestic debt increased from (6303.44 billion) Dinars in 2004 to (49,585.12) billion dinars in 2017, and the debt burden in 2020 reached (2,569.8) billion dinars, to record the impact of total domestic public debt (66,816.4) billion dinars in the same year, The increasing burden of domestic public debt is reflected in additional expenditures in the country’s general budget, and the weakness of public financial management makes public tunnels take an escalating form over time, which explains the growing budget deficit and thus creates a new increase in domestic public debt and that continuing in such a circle will have a negative impact on the overall financial performance of the country, particularly in a rentier country such as Iraq. The fact that the tunnels exceed public revenue requires the government to issue and sell securities to finance the budget deficit and therefore the volume of domestic public debt will increase along with the increasing burden of debt servicing, which will lead to a reduction in the ability of the Iraqi economy to meet its financial obligations as well as achieve a number of undesirable effects on the national economy.

Table3 Iraq’s domestic debt and debt burden for duration (2004-2020)

Domestic public debt (1 billion dinars) Domestic debt growth rate%2 Debt burden (1 billion dinars)


Total domestic debt (1 billion dinars) (4) Years
6061 242.44 6303.44 2004
6593 8.77 263.72 6856.72 2005
5645 14.37- 225.8 5870.8 2006
5193 8- 207.72 5400.72 2007
4455 14.21- 178.2 4633.2 2008
8334 87.07 337.36 8671.36 2009
9180 10.15 367.2 9547.2 2010
7446 18.88- 297.84 7743.84 2011
6547 12.07- 261.88 6808.88 2012
4255 35- 170.2 4425.2 2013
9520 123.73 380.8 9900.8 2014
32142 237.62 1285.68 33427.68 2015
47362 47.35 1894.48 49256.48 2016
47678 0.66 1907.12 49585.12 2017
41822.9 12.28- 1672.9 43495.8 2018
38331.5 8.34- 1533.2 39864.7 2019
64246.6 67.60 2569.8 66816.4 2020

 Source:  (1) Central Bank of Iraq, Directorate General of Statistics and Research, various annual bulletins. – (2,3,4) of the work of researchers.

The third axis: the diagnosis of the path of domestic public debt and its impact on investment spending and some macro variables in the Iraqi economy

First: Analysis of the reality of investment spending in Iraq

Investment spending is one of the main areas in which advanced management and technology expertise can be gained, as well as a means of obtaining advanced production capacities, creating jobs to gain unemployment as well as improving the quality of products. By tracking table data (4), investment spending reached JD 3,014,733 million in 2004 and continued to rise to JD 6,027,680 million for 2006 at an annual growth rate I forgot (31.83 million dinars). While the proportion of investment expenditures from public expenditures (15.53%), it recorded a low growth rate of (28.12%) during 2007 due to the reflection of the political and security situation, which reflected negatively on the economic situation and thus on investment spending to reach 19.78%,  Economic mismanagement has also negatively affected the environment of the Iraqi economy, public spending on the one hand, investment spending on the other, administrative and financial corruption and the overpowering of the public interest. Investment spending increased again in 2008 to 11,880,675 million dinars at a growth rate of 53.43 percent, and was forgotten from public expenditures (20 percent) due to higher oil prices and a relative improvement in The security situation reflected in the gradual recovery of the economic sectors as well as the increase in crude oil revenues as a result of the rise in oil exports, but continued to decline the rate of growth of investment spending to a negative rate (11.50%) due to the decline in oil prices as a result of the global financial crisis and the resulting decline on the volume of oil revenues. Investment spending (34,647,000) was 1 million dinars in 2013, the highest value reached during the research period at a growth rate of 18.04 percent.  As a result of the rise in oil prices and the improvement of the economic and security situation, which reflected positively on the increase in oil revenues while the percentage of public expenditures (29.08%), and with the control of terrorism in some provinces of Iraq and thus the decline in oil prices, investment tunnels decreased to a value of (24.9%) 30,767 million dinars at a negative growth rate of (28.04%) in 2014, a decrease in public expenditure to 22.22 percent, and investment tunnels continued to decline until 2018. During 2019, investment expenditures improved to 24,422,590 million dinars at a positive growth rate of 76.71 percent, while investment expenditures from public expenditures rose to 21.85 percent from 2018. Due to the health crisis that swept through the year due to the spread of the Corona pandemic on the one hand and on the other hand the collapse of oil prices, the value of investment tunnels decreased to (3,208,905) million dinars at a negative growth rate of (86.86%) and a decrease in public expenditures to (4.21%).

Table (4) Ratio of investment spending to public spending for duration (2004-2020)

Investment expenditures (1 million dinars) Growth rate % Total public tunnels (1 million dinars) Percentage of investment expenditures from public expenditures % Years
3,014,733 32,117,491 9.38 2004
4,572,018 26,375,175 17.33 2005
6,027,680 51.65 38,806,679 15.53 2006
7,723,043.7 31.83 39,031,232 19.78 2007
11,880,675 28.12 59,403,375 20 2008
10,513,405 53.83 52,567,025 20 2009
16,130,866 -11.50 70,134,201 23 2010
17,832,113 53.43 78,757,666 22.64 2011
29,350,952 10.54 105,139,576 27.91 2012
34,647,000 64.59 119,127,556 29.08 2013
24,930,767 18.04 115,937,762 22.22 2014
18,564,676 -28.04 70,397,515 26.37 2015
15,894,009 -25.53 75,055,865 23.69 2016
16,464,461 -14.38 75,490,115 21.81 2017
13,820,333 3.58 80,873,189 17.08 2018
24,422,590 -16.05 111,723,523 21.85 2019
3,208,905 76.71 76,082,443 4.21 2020

 Source: The Central Bank of Iraq, Directorate General of Statistics and Research, has various annual bulletins.

Second: Analysis of some of the financial and monetary effects of Iraq’s domestic public debt for the period (2004-2020)

  1. Monetary implications of iraq’s domestic public debt

That monetary variables are linked to each other in overlapping relationships, which makes the exposure of one of these variables to a certain effect, this effect will be reflected on other variables, i.e. the increase or decrease of domestic public debt will affect the monetary supply and therefore changes in the supply of cash will move to other monetary variables such as inflation and exchange rates, i.e. there are two effects on variables, the first of which is reflected in the impact of the change in the supply of cash and the impact on the impact of the exchange rate. The second is the result of an increase or decrease in total domestic public debt, given table (5) The impact of public debt on the supply of cash can be traced in its narrow and broad sense as well as inflation and exchange rates during the period (2004-2020), as the increase in the volume of debt has been accompanied by an increase in the supply of cash and these rates have been doubled due to the permanence of the increase in cheap cash, as the acquisition of treasury remittances by the banking system has become one of the sources of increase in the new cash issue through the restriction of public debt, which requires the monetary authority to create money corresponding to its acquisition of accumulated assets of instruments Public debt in the investment portfolios of the banking system.1 Ismail, 2020) Despite the central bank’s exploitation in accordance with Law 56 in 2004, under which the Central Bank is granted government lending, the central bank is allowed to purchase government securities in open market operations, data in the Table to increase growth rates in cash supply by parcel as the volume of public debt increased as a result of increased rates of public tunnels, as the period (2004-2015) saw the volume of domestic public debt increase from (5,925,061) 1 million dinars in 2004 to (32,142,805) million dinars in 2015, reflecting this increase on the increase in the supply of cash in the narrow and broad concepts according to official data issued by the Central Bank of Iraq, as the supply of cash in the narrow sense increased from (10148626) million Dinars to (65435425) million dinars, while the increase in the supply of cash in the broad sense of (11498148) million dinars to (84527272) million dinars for the period (2004-2015), and other years saw the movement of the offer of cash in the opposite direction to domestic debt due to Influenced by expansionary fiscal policy and increased government demand for funds as a result of increased oil revenues. As for inflation rates, it is noted that they have experienced a significant decline throughout the study period, from rising from 26.8 percent in 2004 to 53.1 percent in 2006, starting to fall rapidly to achieve low decimal levels, noting that these inflationary pressures continued until 2019. This has seen a negative value reflect the contraction caused by the decline in oil revenues, while these inflationary pressures came to the fore in 2020 when they achieved a positive value of 0.6% as a result of the complex crisis and the consequent increase in government spending for economic and social purposes.

As for exchange rates, they were also not far from the impact of domestic public debt if the impact of debt moves to the exchange rate through inflation rates directly and indirectly, as high inflation rates as a result of increased cash supply in the absence of flexibility of the productive apparatus will lead to a decline in demand for the domestic state assuming the stability of the official interest rate, it will lead to a decline in the real interest rate, which will be reflected in a decline in the subscription of domestic debt bonds, and it is clear Table (5) that the exchange rate of the dinar against the dollar has declined from (1453) dinars/dollars in 2004 to (1166) dinars/dollars in 2014 in conjunction with the growth in inflation rates for that period,  The year 2019 also saw the exchange rate fall to (1,196) dinars/USD from (1,209) dinars/dollars in 2018 due to the impact of achieving negative inflation rates, and then It rose again to settle at a price of (1,234) dinars/USD in 2020, which is arguably the progress of the central bank has succeeded in curbing inflation through the exchange rate because of the latter’s clear impact on the stabilization of inflationary expectations.

Table 5 Total public debt and monetary variables in Iraq for duration (2004-2020)

Domestic public debt (1 million dinars) Cash offer in a narrow sense (1 million dinars) Offer of cash in a broad sense (1 million dinars) Inflation rates % Exchange rate JD/USD Years
5,925,061 10148626 11498148 26.8 1453 2004
6,255,578 11399125 14659350 37.1 1469 2005
5,307,008 15460060 21050249 53.1 1467 2006
4,855,324 21721167 26919996 30.9 1255 2007
4,455,569 28189934 34861927 12.7 1193 2008
8,434,094 37300030 45355289 8.3 1170 2009
9,180,860 51743489 60289168 2.5 1170 2010
7,446,859 62473929 72067309 5.6 1170 2011
6,547,519 63735871 75536128 6.1 1166 2012
4,255,549 73858000 87526585 1.9 1166 2013
9,520,019 72692448 90566930 2.2 1166 2014
32,142,805 65435425 84527272 1.4 1187 2015
47,362,251 75523952 90466370 0.1 1190 2016
47,678,796 76996584 92857047 0.2 1190 2017
41,822,918 77828984 95390725 0.4 1209 2018
38,331,548 86771000 103441131 0.2- 1196 2019
6,424,466 103353556 119906000 0.6 1234 2020

 Source: The Central Bank of Iraq, Directorate General of Statistics and Research, has various annual bulletins.

  1. Financial implications of Iraq’s domestic public debt

The rent of the Iraqi economy has made the oil supplier the main factor in achieving growth and thus economic development, as oil revenues account for the bulk of public revenues and therefore any delay affecting these revenues will work to resort to other sources, the first of which is internal debt to fill the fiscal deficit as a result of the decline in oil revenues, and table (6) shows the development of the indicators of the general budget in Iraq as well as the measurement of the ratios of these indicators in domestic public debt, as the volume of public revenues is observed during the period of The study, in addition to the increasing volume of public expenditures, saw the period (2004-2014) achieve a surplus in the general budget relative to debt from the increase and decrease of these indicators throughout the research period i.e. achieved unprecedented rates, and the years (2015-2016) saw a budget deficit The state reached 3,927.3 billion dinars (3,927.3 percent) for both years, increasing the ratio of domestic debt to actual expenditures (70.6 percent) in 2016, while the ratio of domestic debt to actual revenues increased (87 percent). For the same year, while the years (2017-2018) saw a resumption of a budget surplus as a result of increased oil revenues and a decline in total domestic debt, and years (2019-2020) official data showed a budget deficit of (4,156.6). 12,882.7 billion dinars, which increased the ratio of domestic debt to actual revenues from 35.7 percent to 101.6 percent for both years in a row, while the ratio of domestic debt to actual expenditures grew from 34.3 percent in 2019 to 84.4 percent in 2020, explaining the government’s recourse. Oil this deficit through domestic debt in order to meet its obligations towards individuals.

Table 6 Total public debt and financial variables in Iraq for the period (2004-2020)

Domestic public debt (1 billion dinars) Actual revenue ($1 billion) Actual expenditures ($1 billion) Deficit or surplus (1 billion dinars) *1002/1 100*3/1 100*4/1 Years
6061 32982.7 32117.5 865.2 18.3 18.8 700.5 2005
6593 40503 26375.1 14127.9 16.2 24.9 46.6 2006
5645 49055.5 38806.6 10248.9 11.5 14.5 55 2007
5193 54599.4 39031.2 15568.2 9.5 13.3 33.3 2008
4455 80252.1 59403.3 20848.8 5.5 7.4 21.3 2009
8434 55209.3 52567 2642.3 15.2 16 319.1 2010
9180 69521.1 64352 5169.1 13.2 14.2 177.5 2011
7446 99998.7 69639.5 30359.2 7.4 10.6 24.5 2012
6547 119466.4 90374.8 29091.6 5.4 7.2 22.5 2013
4255 113767.3 106873 6894.3 3.7 3.9 61.7 2014
9520 105386.6 83556.2 21830.4 9.03 11.3 43.6 2015
32142 66470.2 70397.5 3927.3- 48.3 45.6 818.4- 2016
47362 54409.2 67067.4 12658.2- 87 70.6 374.1- 2017
47678 77336 75490.1 1845.9 61.6 63.1 2582.94 2018
41822.9 106569.8 80873.1 25696.7 39.2 51.7 162.7 2019
38331.5 107567 111723.6 4156.6- 35.6 34.3 922.1- 2020

Source: The Central Bank of Iraq, Directorate General of Statistics and Research, has various annual bulletins.


  1. The general budget experienced a planned deficit during the period (2004-2014), and a surplus achieved in the same period while the Iraqi economy suffered only a real deficit during the years (2015-2016) as a result of a significant increase in domestic public debt and that this increase in debt was aimed at achieving even partially economic and political stability and to liberate the territories occupied by ISIS and thus bring the oil fields back to work and resume economic activity on the one hand, and the decline in oil prices that year was the last reason In increasing the volume of debt on the other hand, the years (2019-2020) also saw a real deficit in the general budget due to the political, economic and health crises that the Iraqi economy went through during that period, which also contributed to increasing the size of the domestic public debt.
  2. The public debt burden increased after 2004 to 242.44 billion dinars this year to more than 2,569.8 billion dinars in 2020, indicating a imbalance in debt management while at the same time the absence of a clear strategy for its administration.
  3. Resorting to domestic borrowing does not necessarily mean that there is a imbalance in the economy or gives a negative picture of it, but rather depends on how resources resulting from domestic sustainability are allocated.
  4. The Central Bank has succeeded in curbing inflation by employing exchange rates to stabilize inflationary expectations by intervening to reduce or increase currency supply or demand in order to raise the value of the local currency.
  5. An analysis of the relationship between cash supply and domestic debt is observed as the money supply moves in the opposite direction to domestic public debt as a result of its influence on expansionary fiscal policy.


  1. Establish or establish a sovereign fund with the aim of investing currency reserves in income-producing sources in order to make the most of them in times of oil-related and other crises.
  2. Assessing the ability of the economy to pay off domestic debt and its services before starting the issuance of debt and the underwriting process to avoid falling into the trap of indebtedness and the vicious circle of debt, and it is necessary to ensure that the accumulation of domestic debt and the obligation to pay it on due dates are not allowed to avoid high debt burdens and its economic and social implications.
  3. It is essential that public spending be controlled through a policy that fights corruption first and contributes to directing funds to projects that ensure an increase in public revenues.
  4. It is important to diversify the sources of public funding by developing productive sectors in a way that enables them to achieve balanced economic growth, and to work to activate the tax system to provide a source of financial resources and work to enforce the law and fight tax evasion by adopting a developed tax system that is responsible for increasing public revenues.

References,org .

  1. Bassem Khamis Obeid, Estimating the impact of domestic public debt on the monetary basis in the Iraqi economy for the period (2006-2015), Journal of Economic and Administrative Sciences, Anbar University, Volume 9, Issue 19, 2017.
  2. Central Bank of Iraq, Economic Report, 2011.
  3. CBI, annual report, for different years.
  4. Central Bank of Iraq, Directorate General of Statistics and Research, various annual bulletins.
  5. Central Bank of Iraq, statistical location, financial statements, different years.
  6. Shaimaa Fadhil Mohammed and others, measuring the impact of the development of public debt on Iraq’s federal budget using the ARD model, Wasit University journal of the humanities, Volume 14, Issue 41, 2018.
  7. Taher Haidar Hardan – Investment Principles, Al Mustaqbal Publishing and Distribution House, Jordan – Amman – First Edition, 1997.
  8. Afra Hadi Saeed, Central Bank and Government Borrowing, Ph.D. Thesis presented to the Faculty of Economics management, University of Baghdad, 2004.
  9. Amr Hashim Mohammed Safwat, Emad Hassan Hussein, Rationalizing Public Spending in Achieving Financial Sustainability in Iraq, Kut Journal of Economic and Administrative Sciences, Wasit University, Issue (25), 2017.
  10. Mohammed Hamad Hamid al-Jubouri, Investment Reality in Salah al-Din Province, Ma’am, Tikrit, 2015.
  11. Maytham Laibi Ismail, Malik Abdul Rahim Mohammed Ahmed, The Development of Domestic Public Debt and Its Financial and Monetary Implications Selected Experiences with a Special Reference to Iraq, PhD Thesis, Faculty of Management and Economics, Mustansiriyah University, 2020.
  12. Naji Idris Abdul Saidi, Public Religion and Its Reflection on Investment Tunnels in Iraq for duration (2013-2014) Journal of the Faculty of Education for Girls, Kufa University, Volume 11, Issue 21, 2017, p. 21.
  13. Nour Shadha Adai, Analysis of Public Debt Paths for Duration (2010-2014), Ministry of Finance – Economic Department, Baghdad, 2016.
  14. Yahya Abdel Rahman Reda, Legal Aspects of Non-National Companies, Arab Renaissance House, Egypt – Cairo – 1994.
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