Iraqi Economists Network

شبكة الاقتصاديين العراقيين

Fiscal policy & Federal BudgetThe Iraqi National Economy

The Need to Establishing An Integrated Macroeconomic and Medium-Term Fiscal Framework for the Iraqi Economy, By Dr. Hashim Al-Ali *

Hisham Al Ali


Though the fact Iraq is preparing and issuing a federal annual budget, on yearly basis, since 2004. Besides, and to some extents, Iraq is also adopting few well acknowledged internationally advanced norms in the structure and preparation of the annual budget. Notwithstanding, the existing practice of preparing the budget, being recurrent and/or investment version, its composition, sectoral allocation of resources, and its implementation path, all are far from reflecting the actual socio-economic development priorities and restructuring requirements of the economy on; national, regional and sectoral level.

The main objective of this short paper is to shed a light on the importance of a functional link between medium-term macroeconomic framework, investment programme and fiscal framework, in preparing and establishing an effective federal budget, and hence, using such a budget as an operational tool to steer the economy towards achieving its development objectives, and priorities in a coordinated manner. A medium-term macroeconomic framework should, however, delineate and quantify the main development objectives reflecting, to greater extent, the actual needs of the society and the strategic goals of the economy, such as; positive real GDP growth, economic diversification, low rate of unemployment, manageable inflation rate, and sectoral development priorities and sectoral allocation of investment/contribution to growth and development, poverty reduction and uplifting the society’s wellbeing. These and other objectives are obviously, subject to a number of financial, investments, technical and absorptive capacity constraints. Accordingly, it is imperative, nonetheless, to optimize the state of the macroeconomy given the main objectives and these constraints. Thus, this derived feasible macroeconomic setting, should be used as the main developmental base to structure the country medium-term fiscal and budgetary framework. By doing so, the national economy would achieve, the aimed at, macroeconomic stability –achieving real growth without bottlenecks- and longer term fiscal sustainability.

Furthermore, the paper would attempt to bring together, all significant development pillars in an integrated framework to produce a more developmental oriented federal budget for the Iraqi economy. This would be approached analytically with relevant illustrations.

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