The Impact of Oil Price Changes on the Components of the General Budget Law

(Iraq as a Model)

Abstract

       Oil is considered a primary source of revenue in rentier states, among which Iraq is included. This renders the general budget highly susceptible to fluctuations in oil prices. An increase in prices leads to higher public revenues, enabling an expansion in spending on investment and service sectors. Conversely, a decline in prices causes governments in such rentier economies to face fiscal deficits, which negatively affect public spending. This may compel these governments to resort to measures with long-term adverse consequences, such as borrowing or reducing and canceling certain developmental projects and programs. These measures directly impact the components of the Budget Law, particularly the operational expenditures, which are difficult to reduce due to their link to the continuity of public services and the daily functioning of the administration. Accordingly, fluctuations in oil prices constitute a real and persistent challenge to the stability of fiscal and economic policy. Achieving balance within the provisions of the General Budget Law requires legal examination aimed at developing appropriate legislative remedies for these challenges.