Oil Rents and the Structure of Public Finances in Iraq

Abstract

The Iraqi economy demonstrates that, despite the substantial magnitude of oil revenues, these
resources have not been effectively utilized to establish a diversified economic base capable of supporting
comprehensive development and securing the rights of current and future generations. Instead, the majority of
these revenues are allocated to consumption patterns or to financing current expenditures, which do not
contribute to achieving sustainable development goals. This study examines the interdependence between oil
rent revenues and their management, assessing the resulting improvements or declines in Iraq's financial and
economic performance. It emphasizes the necessity of adopting prudent financial management and diversifying
income sources to ensure long-term stability and prosperity for the country. The research problem lies in the
heavy reliance of Iraq's public finances on oil rents, which exposes the economy to significant risks due to
volatile global oil prices. This dependency leads to structural weaknesses in the revenue and expenditure
framework, limiting its flexibility and sustainability, and consequently hindering efforts to achieve
comprehensive economic development. The results of the estimated model indicate that current public revenues
are heavily dependent on the previous year's revenues, suggesting that revenue generation is influenced by
external factors, particularly expectations regarding fluctuations in oil prices.