The austerity policy on public spending, its causes and economic implications Iraq case study for the period 2015-2020

Abstract

The Iraqi economy is currently facing major challenges that threaten economic growth and stability in the short and medium term at least, as Iraq witnessed in the previous period two major shocks that affected the economy in general, from then to the present day.  The first shock was the deterioration of the security side and the entry of ISIS into a number of Iraqi provinces in 2014, which led to an increase in public spending on the military side. As for the second shock, it was the deterioration and decline in global oil prices, which negatively affected the volume of revenues, and as it is known that the Iraqi economy is a rentier economy that depends on oil revenues, at a rate that in some years exceeds (95%), and this decrease in the volume of revenues coincided with the increase in military spending due to the deterioration of the situation. Security, as was mentioned previously. All these reasons have led to the adoption of many austerity measures by the government, including reducing public spending in the budget, both operational and investment, and the concept of fiscal austerity policies is defined as a set of measures and economic policies that the state takes so that these policies affect the economic sector and contribute to reducing the budget deficit State finance The application of this austerity policy on public spending has led to negative effects on the performance indicators of the Iraqi economy, the most important of which is reducing public spending, as we mentioned previously, and stopping work on investment projects, except in some necessary and extremely important cases. This study aims to clarify the concept of austerity policy on public spending in general, what are the reasons for adopting this policy by the Iraqi government, and what are the economic repercussions and effects that resulted from the application of this policy.