Measuring and Analyzing the Impact of the Efficient Use of Public Debt Towards Public Investment in Iraq for the Period 2003-2021

Abstract

Despite the significant increase in the volume of public spending in the past years, it was not directed towards public investment. The pivotal structures or vital productive sectors, hence the idea of the study, whose aim is to study the importance of public debt and its role in promoting public investment, and to know the reasons for Iraq’s resort to public debt as well as the appropriate financial policies that contribute to enhancing the reality of investment. As the study proved that there is a long-term equilibrium relationship between public debt and public investment, but it is inverse, as an increase in external and domestic debt by one unit leads to a decrease in investment by (-1.29) (-0.65), as it goes towards salaries, wages, and increased military spending, contrary to what it was stipulated by the golden rule, and the study produced many recommendations, the most important of which is directing public debt funds, whether domestic or external, towards importing capital goods that contribute to expanding production capacity by enhancing the role of investment instead of directing them towards importing consumer goods. And the necessity of fully adhering to the golden rule, which stipulates that the condition for borrowing must be for investment and not for other purposes, and to work on using public debt funds in productive investments, not consumption, by setting a wellstudied policy for public debt and following an intentional expansionary fiscal policy that contributes to supporting the private sector. Being the main driver for all productive sectors.