Measuring and Analyzing the Impact of Public Debt Financing Risks on the Budget Deficit in Iraq for the Period 1990–2024

Research idea: The study measures and analyzes the impact of public debt financing risks on the budget deficit in Iraq over the period 1990–2024, against the backdrop of a fragile, oil-dependent rentier economy and highly volatile macro-financial conditions. Its core idea is to clarify how public debt, when directed toward financing current rather than investment expenditure, can become a factor that threatens fiscal sustainability and deepens budgetary imbalances instead of supporting growth and development.

Objectives: The research aims to quantify the effect of public debt financing risks on the deficit and to examine their relationship with gross domestic product, inflation, monetary issuance, and government expenditure, within a theoretical framework that outlines the concept of the deficit, its types, and its financing sources.

Methods: The study adopts a dual methodology combining descriptive analysis to trace the evolution of debt and the deficit across distinct historical phases, and econometric analysis using dynamic panel models (PMG, MG, DFE) alongside Levin–Lin–Chu and Pedroni tests.

Results: The findings reveal a long-run relationship between debt and the deficit, showing that public debt, monetary issuance, and government spending intensify the deficit, while real growth and nominal inflation only appear to alleviate it superficially.

Conclusion: The study concludes that reducing debt-related risks requires diversifying the productive base, improving debt and public finance management, and avoiding inflationary deficit financing.