Role of austerity policy in controlling twin deficit in the Iraqi economy

Abstract

This research raises the following question: Was the Iraqi public budget for 2021 able to transfer the axes of fiscal austerity policy from theorizing in the White Paper (a governmental road map for economic reforms) to implementation by including it in the items of the public budget?Although the White Paper has repeatedly claimed that the public budget of 2021 will be a fiscally disciplined budget, however, the items of that budget contradict these claims.The research concluded that following the policy of fiscal austerity in the year 2021 led to emergence negative effects in the economic performance indicators, represented in decreasing both public expending and income, which led to declining in consumer and investment spending and shrinking in aggregate demand and then a recession in domestic production, which led to a state of stagnation in the Iraqi economyThe public budget for 2021 was expansionary to a large extent, in terms of its current expenditures and the size of the planned deficit in it compared to all public budgets after 2003, and this contradicts the government's call to adopt austerity policiesIn light of conclusions, the research recommends working on restructuring public expending by directing it towards investment spending that supports productive sectors and leads to stimulating economic growth and job creation. And adopting economic diversification policies and searching for additional sources to diversify public revenues