The Impact of Public Sector Financial Dominance on Economic Development Paths in Iraq (2004–2022)

This research aims to analyze the impact of government financial dominance indicators (public expenditures, general budget, and public debt) on average per capita GDP in Iraq for the period 2004-2022. The study relied on an econometric methodology using the Autoregressive Time Lag (ARDL) model to measure the relationship between variables. The results showed a long-term equilibrium relationship between financial dominance indicators and average per capita income, as increasing public spending positively affects economic growth when directed towards productive investments. The results also indicated that public debt is associated with an increase in average per capita income when used to finance development projects, but exceeding 60% of GDP poses a risk to financial stability. The applied analysis revealed sharp fluctuations in the general budget due to excessive reliance on oil revenues and its impact on global crises (such as the 2008 financial recession and the COVID-19 pandemic) and security events (such as ISIS control). An increase in public expenditures was also observed with a weak direction towards infrastructure due to administrative corruption. The study provides a framework for understanding the impact of fiscal policies on the standard of living of individuals, while emphasizing the need for structural reforms to enhance the resilience of the Iraqi.