The Impact of Fiscal Discipline Rules on Financial Sustainability Indicators in the Iraqi Economy

Abstract

This research aims to analyze the extent to which fiscal discipline rules have been applied and their impact on fiscal sustainability indicators in Iraq during the period 2010–2023. Five key indicators were measured, including the budget deficit-to-GDP ratio, debt-to-GDP ratio, current expenditure-to-revenue ratio, interest payment-to-revenue ratio, and non-oil revenue-to-total revenue ratio. The results revealed strong and significant relationships between higher deficits and debt ratios with weaker fiscal sustainability, while increased non-oil revenues contributed to its improvement. The data also showed the continued dominance of current expenditures over revenues and the absence of effective implementation of fiscal discipline rules, which increased fiscal vulnerability and made it highly dependent on oil price fluctuations. The study recommends adopting clear and legally binding fiscal rules, diversifying revenue sources, and enhancing financial transparency to achieve sustainable public finances..