Abstract

Deficit in the state budget is a problem facing developed countries before the developing ones. It affects the economy in general and directly through their impact on macroeconomic variables. The aspects of this effect are depending on the method of financing the deficit, so many economists say that falling into the deficit stage is regarded as a major risk that must be avoided and addressed. Most countries resort to adopting the traditional methods of dealing with this problem like internal and external borrowing; issuing cash; withdrawing from reserves; Etc., as the use of traditional tools is easy to practice and has local effects but can be accompained by the effects of the whole and is not a successful solution, but is to push the problem forward with negative effects. While Islamic alternative is to finance the deficit using the mechanisms of the Islamic economic system (Islamic instruments with its various and various forms like Murabaha, partnership, Mudaraba and leasing, etc. It is possible to find solutions to the budget deficit by the multiple aspects of Islamic financing modes, which can be adapted to the need and requirements of the modern era. This research is exposed to the tools of Islamic financing, their advantages which the researchers believes that it outperforms the traditional counterparts.The research refer to the case of Iraq dificit and how to use Islamic financial tools to manage it.The research also included some conclusions and recommendations.

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