The Role of Public Spending in Correcting Imbalances in the Iraqi Economy’s Production Structure, 2003–2023

Abstract

Inequality in the production structure of the national economic sectors was the most significant problem of the Iraqi economy throughout the period (2003-2023) that was manifested by the prevalence of the oil sector and the decline of other productive branches of the economy, including industry, agriculture, and services. Although it was marked by significant growth in the governmental expenditure over this time, the expenditure was not enough to offset this imbalance; instead, it also entailed the establishment of the rentier character of the economy.

The research results demonstrated that most of the government expenditures were used on the current expenditures especially salaries and subsidies with the investment in the real sectors being minimal in amount and influence. It was also evident that lack of development planning, poor institutions, and systematic administrative and financial corruption are all issues that prevented the spending of the populace in reforming the productive structure and in ensuring sustainable development.

The paper also indicated that the imbalances of the productive structure in Iraq need to be tackled which can only be realized by radical restructuring of the policy of the state expenditure, redistribution of resources to productive areas, a new institutional and legislative climate in favor of investment, and a well-defined economic strategy that would aim at diversifying the economy and relative independence of changes in the oil market.

A number of findings were determined at the end of the research, which can potentially illuminate more on the topic of the research under discussion, as a set of recommendations was offered that could counter some of the unbalances in the Iraqi economy.