THE IMPACT OF FINANCIAL POLICY TOOLS IN REDUCING THE DEFICIT OF THE GENERAL BUDGET

Latfe Alhusseinawi ()
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Latfe Alhusseinawi: Sumer University of Thiqar, 64011, Iraq

European Journal of Accounting, Finance & Business, 2020, vol. 13, issue 23, 1-9

Abstract: In the context of the economic crisis caused by the global oil prices drop and the ISIS terrorist attacks, the Iraqi government adopted a financial and fiscal policy between 2015 and 2018 aiming to reduce the federal public deficit. The present paper analyses the role and importance of this policy. The Iraqi state budget relied mostly on the income from crude oil sales. Thus, the oil price drop had significantly impacted the income, as well as public expenditures. Moreover, the military spending increased due to the need to counterattack the ISIS offensive, causing imbalances augmented by the policies and procedures imposed by the International Monetary Fund (IMF). Our goal is to identify methods of increasing the general state revenues, while complying with the financial rules imposed by the IMF. It is also important to identify the commitment level of the government to enforce the IMF policies and procedures imposed in order to reduce the state budget deficit. The federal laws adopted by the Iraqi government for the years 2015, 2016, 2017 and 2018 were taken under certain conditions, which differ from those adopted in developed countries. The paper shows that the external debt of the Iraqi government is not present in the balance sheet issued and also not recorded by the Treasury. Instead, the amount is based on statistically public debt and on the Federal Financial Bureau statement number 10505 from 22/5/2017. The recommendations highlighted through the present study were reached after analyzing the Iraqi government’s statements. Mainly, our proposal is further preparation of economic studies in order to ensure that the revenues and expenditures estimation is close to reality. Another recommendation is to continuously document the results of past implementations, highlighting the current situation versus future expected developments. It is also important to publish the external debt and to record it in the Treasury accounting records.

Date: 2020
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