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Productive Government Expenditures and Economic Growth
(Iraq Case Study)
Dr. Emad M.A. Abdullatif *
Abstract:
This study investigates how government does in the economy, particularly through its
expenditure. Besides, it studies the role of government expenditure in the economic growth in
Iraq during the period (2006-2010) with significant increase in government expenditure. Iraqi
government with an appropriate expenditure policy can provide a suitable infrastructure and
environment for rebuilding the society and economy.
Results suggest that the relationship between government expenditure and economic
growth has been weak in Iraq; the main reasons are (i) there is a high level of corruption in all
government ministries; (ii) there is not a specific strategy for fiscal policy; (iii) unsuitable
allocation of the government expenditures on ministries. Iraqi government should re-evaluate
its fiscal policy in order to bring advancement to society and economy.
Keywords: government size, government expenditure, budget deficit, economic growth.
JEL Classification: G28, H1, H3, H5, H61, H62, O4.
Acknowledgment:
I would like to acknowledge and extend my heartfelt gratitude to Dr. Prof. Bahadir,
director of the CIS for guidance and comment on earlier drafts of this study, who shared his
academic experience with me. I would also like to thank all my colleagues in the CIS.
This study has been made possible through the direct support of the Center for Iraq studies
(CIS), at Friedrich-Alexander-University Erlangen-Nuremberg, Germany. Besides I want to
thank my colleagues from the college of Administration and Economic, Baghdad University
for their encouragement.
The author
∗ Post Doctoral at the Center for Iraq Studies (CIS), Friedrich-Alexander-University Erlangen-Nuremberg,
GERMANY (2010-2011).
Assistant Professor in Financial Economics, College of Administration and Economics, Baghdad University-
IRAQ; email: emadabdullatif@hotmail.com or emadabdullatif@gmail.com
Table of Contents
1. Introduction………………………………………………………………………………………...
2-3
2. Government Size in the Economy……………………………………………………………...…
4-6
I. Government Core Functions…………………………………………………………………..
4
II. Measuring the size of the Government………………………………………………………..
5
3. Effect of the Government Expenditure on Economic Growth………………………………….
6-11
I. The Extension of Government Activities……………………………………………………..
7
II. Productive Government Expenditure and Economic Growth………………….......................
8
III. Government Consumption and Investment Expenditure……………………………………..
9
4. Productive Government Expenditure and Economic Growth in Iraq…....................................
12-17
I. The Status and Structure of Government Expenditure in Iraq………………………………...
12
II. The relationship between Government Expenditure and trends in GDP in Iraq........................
13
a. Corruption and the productivity……………………………………………........................
14
b. There is not a specific strategy for fiscal policy…………………………………..............
14
c. Unsuitable allocation of the government expenditure among ministries………………….
15
d. Underdevelopment of government expenditure management……………………..............
16
1. Classification of government expenditure……………………………………………..
16
2. Traditional approach of budget formulation…………………………….......................
17
5. Conclusions and Recommendations………………………………………………………………
17-18
The Author……………………………………………………………………………………………..
18
Appendix……………………………………………………………………………..…………………
19-21
References……………………………………………………………………………………...……….
22
List of tables
Table (1): Iraq’s Government Budget (2006-2009)………………………………………………………...
12
List of figures
Figure 1 The government core functions in the economy………………...………………………………..
5
Figure 2 Productive government expenditure and economic growth………………………………………
6
Figure 3 The relationship between government current and investment expenditure...……………………
10
Figure 4 The trends of government expenditure in Iraq 2006-2010…………………………………...…...
13
Figure 5 The relationship between government expenditure and the GDP in Iraq 2006-2010……...…….
13
Figure 6 The biggest 10 ministries in allocations of government expenditure………………………...…...
16
Appendix
App. 1: The allocation schemes of government current expenditure on ministries in Iraq (2006-2010)…..
19
App.2: The allocation schemes of government Investment expenditure on ministries in Iraq (2006-2010)
20
App.3: The allocation schemes of Total government expenditure on ministries in Iraq (2006-2010)……..
21
1
1. Introduction:
Many economists have studied the role of government expenditure on economic growth
with mixed results; some support the hypothesis that the share of government expenditure is
negatively associated with economic growth (e.g. landau 19861); others have found that
government expenditure is positively correlated with economic growth (e.g. Ram 19862); and
some have found uncertain significant relationship.
This study is the first attempt which focuses on productive government expenditure and its
effect on economic growth in Iraq during 2006-2010, as follows.
I. Overview of the study:
The large size of the government and its effects on the economic growth has become one
of the hottest economic and political issues in Iraq during the recent years. Despite Iraq is a
very rich economy with oil, big yearly revenues and a lately sharply increased expenditure,
this government expenditure did not reflect positively on economic growth. Government
expenditure policies aimed at increasing government expenditure productivity; however these
goals were not sufficiently achieved.
Given this, many researchers have examined the effects of government expenditure on
economic growth with mixed results; some support the hypothesis that the share of
government expenditure is negatively associated with economic growth; others have found
that government expenditure is positively correlated with economic growth, and some have
found no significant relationship.
This paper has adopted the assumption that the government expenditure has a significant
impact on economic growth. One condition however exists that this expenditure has to be
productive. The government must have a specific strongly for expenditures. In this case the
government expenditure will have a positive impact on the whole economy.
II. Background of the study:
Government expenditure has increased very significantly in Iraq recently; despite that, it
did not have a positive impact on the national economy and economic growth. The major
reason are unproductive government expenditures, namely that the impact of government
expenditures on GDP was weak and very limited. The government expenditure is still
characterized by lack of control and lack of discipline. The government expenditure should
depend on a specific strategy based on planning, management and expenditure control.
Unfortunately, like this strategy is lacking in Iraq. That is, lack of planning, management, and
expenditure control are the hallmarks of government expenditure policy in Iraq. Besides, there
is not a scientific study and an economic and financial plan specific. The Iraq government
does like a caretaker government in recent years.
1 Daniel Landau, “Government and Economic Growth in the Less Developed Countries: An Empirical Study for
1960-1980”. The University of Chicago, Economic Development and Cultural Change, Vol. 35, No. 1 (Oct.,
1986), pp. 35-75, available at; http://www.jstor.org/stable/pdfplus/1154144.pdf?acceptTC=true
2 Rati Ram, “Association Government Size and Economic Growth: A New Framework and Some Evidence from
Cross-Section and Time-Series Data”, the American Economic Review, Vol. 76, No. 1 (Mar., 1986), pp. 191-
203. Available at, http://www.jstor.org/stable/pdfplus/1804136.pdf
2
III. Hypothesis of the study:
The study is based on a fundamental premise that “the government plays an important role
in the economy by its fiscal policy including expenditure and revenue. The government
should use this expenditure accurately and scientifically to support the economy and to make
it more productive which is positively reflected in the GDP and economic growth”.
IV. Objectives of the study:
This study aims to achieve the following:
1. How can measure the government size in the economy, what is the effect of that size and
how big it should be.
2. Distinguish between productive and unproductive government expenditure and what kind
of effect do they have.
3. Determine the relationship between government current and investment expenditure.
4. Discover the relationship between government expenditure and economic growth in Iraq.
5. Study the current mechanism by which government resources are allocated, and trying to
correct them.
V. Problem of the Study:
This study wants to illustrate the main problem of the Iraqi economy. Despite the high
GDP of its economy and a significant expenditure increase during the recent years, it still
suffer from destruction of its infrastructure, damage in institutional services and bad services
provided. Besides, there is not strong relationship between the government expenditure and
the economic growth.
VI. Research methodology:
This study depends on deductive methodology from the theoretical aspect of the role of
government in the economy. The assumption is that government expenditure is very important
to rebuild Iraqi society and economy. In addition, this study considers the government
expenditure as a generally exogenous variable in the macroeconomic and economic growth
model, determined mainly by the fiscal policy. In that sense, government expenditure is an
independent variable in the economic growth model. On the other side, the dependant variable
is the economic growth.
VII. Divisions of the study:
In order to examine the validity of this study’s hypothesis, the study is divided into three
sections. Section 1 reviews the general idea of the study. Section 2 briefly mentions the
government size in the economy and how can measure it. Section 3 provides the theoretical
framework of the effect of the government expenditure on the economic growth. Section 4
discusses the relationship between productive government expenditure and the economic
growth in Iraq during the period 2006-2010. Section 5 concludes the study.
3
2. Government Size in the Economy:
It is a fact that no society throughout history has ever obtained a high level of economic
affluence without a government. Where governments did not exist, anarchy reigned and little
wealth was accumulated by productive economic activity. After governments took hold, the
rule of law and the establishment of private property rights often contributed importantly to
the economic development of Western civilization, and it has similarly impacted on other
societies as well. Government is a necessary, though by no means sufficient, condition for
prosperity.
It is also a fact, however, that where governments have monopolized the allocation of
resources and other economic decisions, societies have not been successful in attaining
relatively high levels of economic affluence. Economic progress is limited when
government’s share of the economy is zero percent, but also when it is at or near 100 percent.
The experience of the old Soviet Union revealed this as did the comparison between East and
West Germany during the Cold War era or of North and South Korea today. Too much
government stifles the spirit of enterprise and lowers the rate of economic growth.
I. Government Core Functions:
Generally, the government intervenes in the economy in four ways3;
1. It produces goods and services, such as infrastructure, education, and national defense.
Measuring the effects of these goods and services is difficult because they are not
bought and sold in markets.
2. It transfers income, both vertically across income levels and horizontally among groups
with similar incomes and different characteristics.
3. It taxes to pay for its expenditure, which can lower economic efficiency by distorting
behavior. Not all taxes are equally distortionary, however, so there are ways of reducing
the costs of taxation without changing the size of government. Furthermore, deficit
spending does not allow the government to escape the burden of taxation since deficits
impose their own burden.
4. Government regulation modifies economic activity. The economic effects of regulation
are the most difficult to measure, in terms of both costs and benefits, yet they cannot be
neglected because they can be interchangeable with taxes or government spending.
The function of the government can improve economic efficiency and thereby improve
economic growth. Regardless of the debate concerning the activities that make up the core
function, there are two broad categories that emerge in most of the research made in this area.
These two are (i) the protective functions; includes establishment of the rule of law, national
defense and private property rights which can protect people from plunder; and (ii) the
provision of a limited set of collective goods such as education, monetary stability, and
physical infrastructure4. The involvement in producing goods for collective consumption
includes goods such as defense, roads, education, and public affairs. Goods and services, that
otherwise would not be provided at all or provided in scarce quantity.
3 Marc Labonte, “The Size and Role of Government: Economic Issues”, Congressional Research Service,
Washington D.C., June 14, 2010, p.2, available at; http://www.fas.org/sgp/crs/misc/RL32162.pdf
4 James Gwaetney, Robert Lawson, and Randall Holcombe, “The size and functions of government and
economic growth”, Joint Economic Committee, Washington, April 1998, pv, available at;
http://www.house.gov/jec/growth/function/function.htm
4
Generally speaking, the government is able to;
1. Impose regulation on and collect taxes from other sectors of the economy.
2. Producer goods and services
that it can either sell in the
market or supply free of
charge to individual and the
community.
3. Distribute funds through
transfers.
We examine each of these forms
of government intervention under
five headings as shown in figure 1;
the government has a strong power
to influence economic activities by
its functions in the economy and
society. Moreover, the government
spending on state provided goods
and services are injected into the
circular flow of income and the
taxation will leak from it.
The government plays a central
role in the economy. It can raise
funds through the taxation of
households and firm. The proceeds
can be spent by providing subsidies
to or buying output from firms. The government also provides households with transfer
payments (e.g., pensions, unemployment benefit, income support, etc) and services (e.g.
defense, police, health services, education, etc)5.
II. Measuring the size of the Government:
There are many ways to measure the size of the government, it is usually measured by
expenditure and taxation, and policies chosen by government to achieve specific goals have a
profound effect on these measures. Most analysts have defined "Government Size (GS)" as
the ratio of government expenditures (GE) to the total output of an economy, with total output
usually measured by gross domestic product (GDP)6.
GS= GE
GDP ……………(1)
But as government may grow more and more, the ratio of government expenditures to GDP
may rise; generally for two reasons: (i) the scope of government activity may broaden, that is,
government may increase the amounts and types of goods and services it provides; and (ii) the
cost of providing a constant level of goods and services may rise relative to the prices of
5Graeme Chamberlin and Linda Yueh, “Macroeconomics”, Thomson learning, 2006, p6, Available at;
http://estore.bized.co.uk/freecontent/300054E2.pdf
6 William D. Berry and David Lowery, “The Measurement of Government Size: Implications for the Study of
Government Growth”, Cambridge University Press, The Journal of Politics, Vol. 46, No. 4 (Nov., 1984),
p.1193. Available at; http://www.jstor.org/stable/pdfplus/2131249.pdf?acceptTC=true
Government
intervention
by
as
regulator
as producer
as
consumer
as provider
of cash
transfers
and
subsidies
as tax
collector
Figure 1; the government core functions in the economy
Source: United Nations, “Public Sector indicators”, T/SG/AC.6/2000/L.2,
Available at;
http://unpan1.un.org/intradoc/groups/public/documents/un/un-00001.pdf
5
goods and services in the private sector. This increase may have a positive or a negative
impact on the economic growth.
There are two main reasons why expenditures might be considered a better measure of the
size of government than revenues; (i) revenues are more volatile than expenditures and are
only indirectly controlled by legislators. They are particularly sensitive to economic
conditions; (ii) expenditures and revenues can temporarily diverge because of budget deficits.
Therefore, cutting taxes without corresponding spending cuts does not permanently reduce the
size of government, and measuring the size of government by revenues gives the misleading
impression that government is smaller than it is; (iii) the government expenditure is a function
of tax, when the government wants to increase expenditure, it should find the resources to
finance it and it usually finances it by taxation.
It is very important to determine the size of government and the range of its intervention
in the economy in order to identify the relation between the size of government (which
represents government expenditure) and the economic growth (which represents GDP). This
will be outlined in next point.
3. Effect of the Government Expenditure on Economic Growth:
Government expenditure is a key variable that influences the economic activities; it also
plays on an important role in supporting economic growth. If government expenditure is zero,
apparently there will be very little economic growth because legal enforcement, protecting
property. And developing an infrastructure would be very difficult. Some government
expenditure is necessary to uphold the rule of law7.
On the other hand, if government expenditure is too high, it negatively affects economic
activities and will reduce economic growth; moreover, it will either lead to high tax rates or
increase interest rates if government finances by borrowing or a combination of both.
Figure 1 shows the relationship
between size of government and
economic growth. As the size of
government, measured on the
horizontal axis, expands from zero
(complete anarchy), initially the growth
rate of the economy-measured on the
vertical axis- increases. This curve
looks like an inverted U curve, point B
represents that. Government
expenditure has a positive effect on the
economic growth that means each
increase in government expenditure
will reflect a raise in economic growth.
Further increase of government
expenditure and expansion beyond
point B will further increase economic
growth, especially when government focuses on the infrastructure and investment expenditure.
By regulating the economic environment, the economic growth will increase to reach point A
7 Daniel J. Mitchell, “The Impact of Government Spending on Economic Growth”, Institute for Economic
Policy Studies, No. 1831, March 31, 2005, p4, available at;
http://www.heritage.org/Research/Reports/2005/03/The-Impact-of-Government-Spending-on-Economic-Growth
GE/GDP
GDP Growth
25-35%
B
C
D
Productive Government Expenditure
A
Figure 1: Productive government e xpenditure and economic growth
Source: Author's conceptualization, assista nce by: Richard K. Vedder
and Lowell E. Gallaway, “Government Size and Economic Growth”,
Dec.1998, Joint Economic Committee, p. 2. Availabl e at;
http://www.house.gov/jec/growth/govtsize/govtsize.pdf
Figure 2: Productive government expenditure and economic growth
6
which reaches its peak in this curve. In this point, the economic growth reaches a high level,
whereas, the government improves economic activities and supports private activities, where,
the government interferes to supplement the private sector and together they promote
economic growth.
This curve can be expressed in a simple quadratic method, as follows:
GDP=a +bG -cG2 ……………(2)
The positive sign on the linear term, G, is designed to show the beneficial effects of
government expenditure on economic growth, while the negative sign for the squared term
means the variable measures any adverse effects associated with increased governmental size.
Since the squared term increases in value faster than the linear term, the presence of negative
effects from government expenditure eventually will outweigh the positive effect, producing
the downward-sloping portion of Figure 1.
What sort of government expenditure will lead the economic growth to reach point A?
From the beginning point A via point B, the role of government expenditure has a positive
impact on the economy and on society. The government spends in specific goods which are of
great importance for the society. The expenditures do not have a negative impact on the
private sector. On the contrary the public and the private sectors work together and
complement each other. Furthermore the government invests in orders which are needed by
both its citizens and its investors as well. E.g. most of OECD economies focus on the
expenditures that include social protection, health, general public services, education, and
economic affairs8 respectively more than others to support their economies.
After point A, if the government continues to expand its size more. This will have a
negative effect on its economy; besides, this expansion will be harmful to economic growth.
In this situation the curve will reach point C, see figure 1.
I. The Extension of Government Activities:
What determines that expansion of the government size?
How does the government know about point A?
How can the government stay in the specific gray color area in figure 1?
The government should stay around this point by determining its expenditures at a 25-35%
range as a percentage of GDP, like most developed economies do9. In addition to hard study
in order to find what sort of expenditures may be have a positive impact on the economy as
productive government expenditure. Thus the curve will not go down after point A, vice versa,
it will go up or at least stay in the same level which is located in the gray zone, where the
most important government expenditure is concentrated, which characterizes productivity.
Monitoring of government expenditure and public activities over time will allow for a
more robust assessment of the degree to which such trajectories are found in practice and
whether a significant departure from the mainstream is associated with any distinctive
8 Further information See; OECD, national Accounts, General Government Accounts, Government Expenditure
by function, Available at: http://stats.oecd.org
9 Further information See; James Gwaetney, Robert Lawson, and Randall Holcombe, “The size and functions of
government and economic growth”, Op. Cit...
7
differences in context or in output/outcomes10. The government should watch its activities and
processes whether they achieve their target or not, and how high the percentage of actually
achieving what had been planned is.
This would assist to review the degree to which measures are unstable, either because they
must be changed regularly as they inevitably lose their impact over time, or because of a
somewhat pessimistic attempt to maximize the apparent performance improvement. One key
value of monitoring change over time is to assist to resolve complex problems which the
public sectors faced in implementation. Moreover this procedure leads to coordination
between the planed government expenditure and practice. Despite that, the challenge still
exists how to determine whether, and in what proportion, programme activities and public
sector processes contribute to outputs, and similarly which outputs contribute significantly to
which outcomes.
Furthermore the government should adjust its intervention to correct its expenditure’s trend,
which must be useful for the society. Research is done to find exactly what the society and
private sector needs in order to sustain the high level of economic growth. On the other side,
as we know, when the private sector becomes bigger, than the government can get more tax
from it and finance the expansion of its expenditure. That does not mean an increase of the tax
rate but an increase of the tax base and this does not mean an increase of the tax payer’s
burden.
II. Productive Government Expenditure and Economic Growth:
The notion of productive government expenditure is predicated on the interpretation of
public sector activities as production processes. The public sector employs human and other
resources and accumulates capital stock to produce public goods, such as “economic
stabilization,” “judicial services,” “national defense,” “protection of the poor,” and, at times,
even private goods. Productive government expenditure may be defined by comparing outputs
produced, or objectives achieved, with given expenditures11. This result has to be achieved of
the; (i) Lowest possible cost; Public sector operations must be cost effective, that means they
must achieve their specific objectives at minimum cost. (ii) Appropriate mix of output and
sustainable levels of aggregate expenditure; for public expenditures to be productive in the
aggregate, the mix of public sector outputs should be optimal.
In other words, productive government expenditure can be defined as the expenditures
which have a positive impact on the two main directions, (i) in society through provision of
best services and goods to citizen. (ii) And in the economy through support of the economic
growth in the private sector12. In other words, productive government expenditures (Return on
government expenditures) means every dinar spent by government agencies in order to cover
public needs must give benefits to society and contribute to economic growth. In brief, these
expenditures have a very good return on the whole of the society and economy.
10 OECD, “Measuring Government Activity”, 2009, p.23, available at;
http://www.iadb.org/intal/intalcdi/PE/2009/03403.pdf
11 Ke-young Chu, Sanjeev Gupta, and others in Fiscal Affairs Department, “Unproductive Public Expenditures a
Pragmatic Approach to Policy Analysis”, IMF, Washington D.C., Pamphlet Series No.48, 1995, pp3-4,
available at; http://www.imf.org/external/pubs/ft/pam/pam48/pam48con.htm
12 Jhy-hwa Chen, Jhy-yuan Shiehy, Ching-chong Laiz, and Juin-jen Chang, “Productive public expenditure and
imperfect competition with endogenous price markup”, Oxford Economic Papers 57 (2005), p523; Available at;
http://oep.oxfordjournals.org/content/57/3/522.full.pdf+html
8
However, a productivity measure is commonly understood as a ratio of output to input, For
example, outputs might be measured in terms of public goods and services13, while input
might be measured in terms of expenditure used which means effort or monetary cost, and we
can express it by equation as follow:
PGE=PS/EU ≥ 0 ……………(3)
Where PGE is the Productive Government Expenditure which the government is looking
forward to reach PS are the Public Services whose provision by the government and EU is the
Expenditure Used, the money used by government to provide these services means the cost of
public goods and services.
Unproductive Government expenditure may be defined as the difference between the
actual public spending on the program and the reduced spending that would yield the same
social benefit with maximum cost-effectiveness 14 . And we can express productive
government expenditure by equation as follows:
PGE=PS/EU < 0 ……………(4)
The challenges facing measurement of the public services are that some of these services
are immeasurable because they cannot be represented in monetary form and cannot be
expressesd in numbers, e.g. defense, protection of society, etc...The measurement of
government activity is very complex. In that case the government should depend on a
benchmark which is used in the other countries and should encourage measuring the
performance of this sector.
Productive government expenditure leads to cost adjustment and an increase of labour and
capital productivity. In addition, it should drive up private productivity growth, which
supports the relation between government capital and private productivity.
III. Government Consumption and Investment Expenditure:
Government expenditure is a main part of the aggregate demand side of the economy
affecting economic growth. It is generally classified into two categories: Consumption and
Investment expenditures. Consumption (non development) government expenditures affect
private investment positively via the demand channels but may also affect it negatively in
terms of budget deficits, future taxes and no complementary effect on investment. However,
Investment (Development) expenditures mainly focus on the provision of infrastructure and it
is an upgrade and hence positively affects private investment. Investment expenditure has a
lasting impact on the economy and helps provide a more efficient, productive economy.
Government investment expenditure plays a role in any economic strategy because it is
seen as an essential growth driving force. Furthermore, government investment is a part of the
supply side of the economy since it is an essential input in the production process. Moreover,
it is an important potential contribution to economic growth and achievement of social
development objectives. The government should support the economy and the private sector
in particular to promote development through an increase and more efficient investment in
13 OECD, “Measuring Productivity, Measurement of Aggregate and Industry-Level Productivity Growth”, 2001,
Available at; http://www.oecd.org/dataoecd/59/29/2352458.pdf
14 Ke-young Chu, Sanjeev Gupta, and others in Fiscal Affairs Department, “Unproductive Public Expenditures a
Pragmatic Approach to Policy Analysis”, Op Cit. p5.
9
infrastructure. In the other side, lower government investment could restrict the long-term
potential of the economy and so lead to higher unemployment.
Current expenditure is recurrent spending or, in other words, spending on items that are
consumed through the process of providing a good or service. It would include wages and
salaries and expenditure on consumables-stationery, drugs for health service, bandages and so
on. By contrast, investment expenditure is spending on assets, particularly built productive
assets primarily. It is the purchase of lasting items which will be used time and time again in
the provision of a good or service, e.g. the building of a new hospital, roads and so on.
There is a strong relationship between government current expenditure and investment
expenditure; we can find that by use of equations as follow;
GE=CE+IE …………… (5)
Where, the investment expenditure as used as a function in current expenditure as shown in
equation 6;
CE= �(IE) …………… (6)
And the current expenditure in the next year equals the current expenditure in the current
year plus investment expenditure in the last two years, assuming the investment projects will
finish within two years and they will transfer from investment expenditure to current
expenditure as shown in equation 7;
CEt+1=CEt+ IEt-1 ……(7)
Figure 2 shows the relationship between two kinds of government expenditures, one is into
consumption and the other is into investments. The zone above the main line in gray color
shows that most of the current government expenditure goes into consumption and not into
investments. The other line located below the main line represents the opposite situation.
Decision makers in government should choose between both ways of spending government
money according to society needs, the economic situation and the level of economic growth.
Figure 3: The relationship between Current and Investment Expenditure
CE
A
45
o
B1
B
Investment Expenditure
IE
A1
Current Expenditure
Source: Author’s Conceptualization
10
Furthermore, the relationship between these two types of spending is very important.
Investment expenditure has a lasting impact on the economy and helps provide a more
efficient, productive economy that means it has an impact on the supply side. When the
government spends on public goods and services, e.g. schools, hospitals, etc., it means a
benefit for the future as opposed to the immediate benefits that follow from current
consumption. However current expenditure has a strong impact on demand.
Both of these sorts of government expenditures might be used to have an instrument in
fiscal policy to impact on the economy particularly in economic business cycles. In the
recession period, when the aggregate supply is higher than the aggregate demand, the
government should increase its current expenditure as a percentage of GDP in order to move
the demand which will promote the economy. In contrast, when the economy is in a recovery
period, when the aggregate demand is higher than the aggregate supply, the government will
aim at investment expenditure and increase it as a percentage of GDP in order to have an
impact on an aggregate supply. That means that the fiscal policy will go on the curve between
point A and point B (see figure 2) to determine how much of the GDP should be spent for
consumption and how much for investment for achieving a positive impact on economic
growth. This would help to stabilize the economy and it would also mean a boost for
economic growth by promoting public investment.
Figure 2 shows the limit of production possibility below. Point A has a high level of
current expenditure and low investment expenditure. The level of growth in the economy is
relatively lower. Point B in contrast has a much higher level of government investment and
will help create more growth in the long term.
Further, if the government focuses on the current expenditure in point A more than on
investment expenditure and stop in the area of the curve next year with increased expenditure
to next point A1 in the next curve (see figure 2), then this policy will support the demand side
on may have a negative impact on economic growth. It is more difficult to switch from the
focus on current (consumption) expenditure to investment expenditure, because this is a
gradual process which needs time. Current expenditure is inflexible and it represents
commitments that are fixed and immutable in the short term. By contrast, if the government
focuses on investment expenditure in point B, it can increase expenditure in next year. This
will transfer it to point B1 in anther curve and it will support economic growth generally.
11
4. Productive Government Expenditure and Economic Growth in Iraq:
I. The Status and Structure of Government Expenditure in Iraq:
We can analyze Government expenditure in Iraq through these following points which are
embodied in table 1:
1. Government expenditure has increased significantly during the period 2006-2010, as it
raised from 50.9 trillion dinars in 2006, to 84.6 trillion dinars in 2010, an average increase
of 35.71%.
2. In fiscal year 2010, an assessment of Government expenditure was at 84.6 trillion dinars
(equivalent to 72.3 billion dollars), which include both current expenditures increased by
60.9 trillion dinars and investment expenditures by 23.6 trillion dinars. It is noted that
current expenditures had risen by 52.6% and investment expenditures have declined by
114.7% compared with the level in fiscal year 2006. And the percentage of investment
expenditures to current expenditures is 38.82%.
Table (1): Iraq’s Government Budget (2006-2009) Trillion ID
2006 2007 2008 2009 2010
Total Expenditures 50.963 51.727 91.683 69.165 84.657
Current Expenditure
39.966
38.837
61.099
54.148
60.980
% of Total
78.42
75.08
66.64
78.28
72.04
Investment Expenditure
10.997
12.890
30.584
15.017
23.676
% of Total
21.58
24.92
33.35
21.72
27.96
CE/IE
27.51
33.19
50.05
27.73
38.82
Total Revenues 45.392 42.064 80.476 50.408 61.735
Oil Revenue
42.287
41.036
75.669
47.528
59.794
% of Total
93.16
97.
57
94.02
94.28
96.85
Tax Revenue
2.417
0.950
4.802
2.837
1.309
% of Total
0
5.32
02.2
5
0
5.98
0
5.62
03.15
Deficit 5.570 9.662 6.207 18.757 22.922
GDP* (Billion of IQD) 114.894 120.042 132.233 139.452 147.923
Expenditures/ GDP 44.35 43.12 65.63 49.18 57.49
Revenues/ GDP 39.5 35.06 60.93 35.84 41.93
Deficit/GDP 4.84 8.05 4.7 13.33 15.56
Population* (Million) 28.750 29.584 30.413 31.234 32.108**
Sources:
1. The Ministry of Justice, “The Official Gazette of Iraq (Al-Waqa’i Al-Iraqiya)”, No. 4016, year 47, 02.02.2006
2. ………………………………………………………………………………….., No. 4036, year 48, 12.03.2007
3. ………………………………………………………………………………….., No. 4067, year 49, 13.03.2008
4. ………………………………………………………………………………….., No. 4086, year 49, 15.09.2008
5. ………………………………………………………………………………….., No. 4117, year 50, 13.04.2009
6. ………………………………………………………………………………….., No. 4126, year 51, 15.03.2010
*The Economist, „Iraq-Economist Intelligence Unit”, available at; http://www.alacrastore.com/country-snapshot/Iraq
** Estimated
3. There is a big imbalance in the composition and structure of the budget, because of the
considerable variation in the distribution ratio of budget revenues between current
expenditures. This situation has resulted in a shortage which continues in the government
12
budget, cannot be covered unless through huge investments needed by the country,
particularly in rebuilding infrastructure, the rehabilitation of the petroleum sector to 2.5
million barrels per day in the near
future, as well as the advancement of
the productive sectors, primarily the
industrial sector.
It should be noted, that the decision
maker should adopt the appropriate
combination of current and investment
expenditure to both satisfy public needs
(social goals), and the achievement of an
appropriate level of investment which
supports the private sector and to give a
strong impetus to economic growth. That
means should use the best allocation of
expenditures to achieve the maximum
level of social benefits, meanwhile
provision more facilities through infrastructure expenditure which lead to promote economy
and private sector.
II. The relationship between Government Expenditure and trends in GDP in Iraq:
The Iraq’s GDP has also increased during the period (2006-2010) but in lesser degree than
the rate of increase of government expenditures, as it rose from 114.893 trillion IQD in 2006,
to 147.923 trillion IQD in 2010, as compound annual growth rate is 5.18%. The main reason
of this increase is the growth of oil sector and oil prices, and the oil sector has constituted
more than 60% as a percentage of GDP.
Figure 4 demonstrates the relationship between government expenditure as represented by
GE/GDP, and economic growth as represented by GDP growth in Iraq during the period
2006-2010. We note that relationship
between them is positive, but that does
not mean that government expenditure
supports economic growth. However,
both of them increased because of the
growth and the price increase in the oil
sector. The rise in oil prices led to an
increase of the GDP, since the oil sector
represents the most important sector in
the Iraqi economy as mentioned before,
and also more than 90% as a share of
total revenue has came from this sector.
That means the oil sector represents a
generator of the Iraqi economy.
The role of government expenditure
on the economic growth has been very
limited and ineffectual. That means the
government expenditure has been characterized by non-productivity, because its increase does
not reflect a positive impact on economic activities, especially growth. Moreover, the
government’s role has become limited just to spending money without leaving any tracking
Figure 5: The Relationship between GE and GDP in
Iraq (2006-2010)
Source: Drawn by the author depending on table 1.
2006 2007 2008 2009 2010
0
2
4
6
8
10
12
44.5 43.12 65.63 49.18 57.49
GDP growth
GE/GDP
Source: Drawn by the author depending on table 1.
GE
CE
IE
0
10
20
30
40
50
60
70
80
90
100
2006 2007 2008 2009 2010
Trillion IQD
Figure 4: The Trend of GE in Iraq 2006-2010
13
effects on economic activities or the social situation. There is no a specific fiscal policy which
deals with the economic variables and what the economy and the society needs exactly.
a) Corruption and the productivity
Generally, an increase in government size provides more opportunity for political
ransacking, making the politicians and bureaucrats be more corrupt. In other word, bigger
governments increase the expected payoff of illegal activities and, as a result, give an
incentive leading to more illegal activities such as corruption.
There are five channels through which corruption lowers growth: (i) Higher public
investment; (ii) Lower government revenues; (iii) Lower expenditure on operations and
maintenance; and (iv) Lower quality of public infrastructure. (v) Increasing public investment
while reducing its productivity15.
As seen above in figure 4, the Iraqi government size (as the ratio of government
expenditures to the GDP) is very big, its reached 65.63% in 2008, 57.49% in 2010, and 51.98%
as an average during 2006-2010. When compare this size with its percentage in the 1990’s, it
will appear that its biggest, whereas in 1996 it reached 21.12% and in 2001 reached 20.98%16,
And this size is the biggest compared with Saudi Arabia with a government size of 29.58%
and Arab United of Emirates with 20.98% in 200817.
Furthermore, the report of Transparency International (TI) has included The Corruption
Perceptions Index (CPI), ranks countries in terms of the degree to which businesspeople and
country analysts perceive corruption to exist among public officials and politicians. So Iraq’s
rank was in the end of this report no. 178 from 180 countries in 2008 with a confidence range
of 1.1-1.618 and (1.5) in 200919.
That reflects on the productivity of government activities and expenditure and made
obvious that government expenditure is non-productive.
b) There is not a specific strategy for fiscal policy:
The Iraqi government spends money without a specific financial and economical plan.
Despite the Iraqi ministry of finance prepare financial plan yearly and the parliament has
voted and give his agreement to execute it, but in fact the Iraqi government is like a caretaker
government that means spending money just when the society need.
The Iraqi government expenditure is directed mainly to facilitate tasks for satisfy society
need in usual method without look clearly at what exactly the society need to especially in
current situation. We can find that from the size of government current expenditure and its
percentage of total government expenditure is very big compare with government investment
expenditure (see table 1 and figure 3). Iraqi government has not focused on the fiscal strategy
15 Tanzi, Vito and Davoodi, Hamid Reza, “Corruption, Public Investment, and Growth”, IMF, Working Paper
No. 97/139, Washington D.C., October 1, 1997, p. 8. Available at;
http://www.imf.org/external/pubs/cat/longres.cfm?sk=2353.0
16 Measured by author depend on; Central Bank of Iraq, “Statistical Bulletin (special Issue)”, 1991-June 2003,
available at: http://www.cbi.iq/documents/Annual_2002f.pdf
17 These percentages collected depend on; Arab Monetary Fund AMF, “Statistical Bulletin of Arab Countries”,
Abu Dhabi, 2010.
18 Transparency International, “Global Corruption Report 2009”, Cambridge University Press, New York, 2009,
p402; Available at; http://www.transparency.org/publications/gcr/gcr_2009
19 Transparency International, “The Corruption Perceptions Index 2010”,; Available at;
http://antykorupcja.edu.pl/index.php?mnu=12&app=docs&action=get&iid=10130
14
which achieving the society’s desire and the economy’s requirement to grow up and to
sustainable growth rate of the economy.
In this case, Iraqi government has spent more and more in the wrong way. The government
has spent a lot in areas that are inefficient to the society and economy and which has negative
impact on its financial position as well. As a result, the effect of these expenditures has not a
positive impact on economic growth, that means, government expenditures has increased
without strong impact on economic growth.
Therefore we can consider that the Iraqi government expenditure is unproductive
especially in this period. There is a strong relationship between the effective fiscal policy and
the productive government expenditure. When the government has a specific strategy for
fiscal policy and the ministry of finance has good experiences in implementation all process
and apply the stages for fiscal policy, and then the government expenditure will be
productivity.
Fiscal strategy is very important to financial performance, financial position for
government and facilitating economic growth.
c) Unsuitable allocation of the government expenditure on ministries:
We have mentioned already to concept of productivity which is generally defined as a
measure of the amount of output generated per unit of input. That means productivity is
simply the ratio of services produced to expenditures which are used to provide these services.
By this concept there are two primary ways of increasing productive government expenditure
as follow; (i) increase the value of public services; and (ii) decrease the expenditures used to
provide these services. We can complicate this increasing by add others important factors
which is called allocative efficiency and technical efficiency. With these important factors
will achieve more and more effectiveness of allocation of government expenditures on sectors,
the final result will reflect on economic growth positively.
That prudent fiscal policy provides suitable allocation of government expenditure on
sectors makes more effectiveness in the government expenditures.
This mechanism not exist in mind of financial decision makers especially when prepare the
public budget and fiscal policy in Iraq. We can notice this result from the tables (2, 3, 4, and 5)
which explain the allocation schemes of government expenditures on ministries in Iraq for
period (2006-2010).
We can summaries these tables which explain to trends of allocation schemes of
government expenditures on ministry by current, investment and total expenditure, as fellow;
1. In the ten biggest ministries have acquired allocation of government expenditure which are
formed 70% as a parentage of total government expenditures; the ministry of finance has
acquired the first rank among them with 24% percentage, Whereas the ministry of interior
has acquired the second rank with 12% percentage, and the ministry of defense share
ministry of oil in the third rank with 11% percentage, (see figure 6A).
That means, the government has focused generally on defense and society protection
and despite these expenditures is very important for any society, but is unproductive in Iraq
because the government spends more and more without improvement in the social and
economic environment. We can explore this fact in the table 4, which explain the total
government expenditure. We can calculate the compound annual growth rate for
expenditure of ministry of interior that has increased 20% yearly during the period 2006-
2010. It seems the Iraqi government forgets that every society need beside protection to
health, education, energy and so on.
15
2. In the ten biggest ministries have acquired allocation
of government current expenditure, which are formed
80% as a parentage of total government current
expenditures, the ministry of finance has acquired the
first rank among them with 28% percentage, Whereas
the ministry of interior share with the ministry of
defense have acquired the second rank with 13%
percentage, and the ministry of trade the third rank
with 12% percentage, (see figure 6B).
As we mentioned before the Iraqi government has
spent on the current expenditure more than
investment expenditure that makes the society and
economy do not prosper and unable to solve the
problems which the society and economy suffer from.
3. The ministry of finance has acquired the first rank
among biggest 10 ministries in allocation which are
formed 55.6% as a parentage of government
investment expenditures the ministry of oil has
acquired the first rank among them with 31%
percentage, Whereas the ministry of electricity has
acquired the second rank with 25% percentage, and
the ministry of municipalities and public works the
third rank with 9% percentage, (see figure 6C).
We have mentioned already, the most of expenditures
go to current not to investment, while Iraq economy
extraordinarily need to investment in various area to
rebuild its sectors. Besides, these expenditures will
provide a good and suitable environment for local
and foreign investment to support the private and
public sectors in order to develop for Iraq economy.
The best method to support investment the
government allows to private sector to grow up in the
economy by cooperation with it, as an alternative for
the provision of goods and services by governments,
through Private-Public Partnership (PPP) strategy20.
The government will remove a big burden from the
budget in order to reduce the expenditure and deficit.
d) Underdevelopment of government expenditure
management:
The government expenditure management still uses a
traditional approach in both budget formulation and
classification of government expenditure, as will see
below;
1. Classification of government expenditure:
Iraqi government has used administration
classification of expenditure. This classification
20 Simply the PPP can be defined as an Agreement between government and the private sector regarding the
provision of public services or infrastructure
Figure 6: The biggest 10 ministries in
allocation of GE
A: Total GE
B: Current GE
C: Investment GE
Source: Drawn by author depends on Appendix
1, 2 and 3.
Cou ncil
of
Ministers
3%
Minist ry
of Hig her
Educatio
n and
Scientific
Research
4%
Ministry
of Oil
11%
Ministry
of Tr ade
10%
Ministry
of
Educatio
n
8%
Ministry
of
Defence
11%
Ministry
of Health
7%
Ministry
of
Electricit
y
10%
Ministry
of
Interior
12%
Ministry
of
Finance
24%
Cou ncil
of
Ministers
3%
Ministry of
Higher
Education
and
Scintific
Research
4%
Ministry
of Oil
5%
Ministry of
Electricity
6%
Ministry
of Health
7%
Ministry of
Education
9%
Ministry
of Tr ade
12%
Ministry
of
Defence
13%
Ministry
of
Interior
13%
Ministry
of
Finance
28%
Ministry of
Defence
3%
Ministry of
Health
4%
Council of
Ministers
4%
Ministry of
Constructi
on and
Housing
5%
Ministry of
Industry
and
Minarals
5%
Ministry of
Water
Resources
6%
Ministry of
Finance
8%
Ministry of
Municipalities
and Public
Works
9%
Ministry of
Electricity
25%
Ministry of
Oil
31%
16
identifies the entity responsible for managing the public funds concerned such as
(ministries, departments, etc.). The most of world economies use functional classification
of expenditure because it more clearly than others classification, where give a good view
for all the expenditure and where it will go exactly and the government can monitor
expenditure and its implementation step by step.
This classification supports the effective of government expenditure and makes it more
productivity and transparently.
2. Traditional approach of budget formulation:
The budget formulation process in Iraq is largely based in terms of inputs rather than
outputs. That is, budget is based on how much money is required for salaries, equipment,
capital goods/investment, etc, rather than what the output would or should be for the
required budgetary allocation. Budgetary resource allocation decisions need to be based on
economic rationality and ‘value for money’ criteria rather than on past expenditure trends.
In some countries, like in the UK, public expenditure surveys are undertaken periodically
to review public expenditures in order to make optimal resource use that provides value for
money.
Budget has three interrelated core functions which are planning, management, and
expenditure control. Unfortunately, all the foregoing three core functions of budget are
lacking in Iraq. That is, lack of planning, management, and expenditure control are the
hallmarks of government budget in Iraq. Many countries prepare a rolling expenditure plan
stretching over several years as part of the annual budget-making process.
Iraqi government budget should change and renew the budget method by use modern
formulation and more effective which is results-based budgeting RBB. This technique is a
strategy to increase equity, transparency, autonomy, and accountability and all these will
support the productivity throughout the parts of budget.
5. Conclusions and Recommendations:
The main purpose of this study was to investigate that whether there was a significant
relationship between government expenditure in Iraq during the period 2006-2010.
There is uncertain relationship between the government expenditure and economic growth
in Iraq during the period 2006-2010. Despite the government expenditure and economic
growth have increased, but that does not means the government expenditure support economic
growth, however, both of them increasing cause by impacted by the oil sector. Whereas the
increase in oil prices led to rise the GDP and at the same time led to enhance government
ability to increase its expenditure. That means the oil sector represents as generator of the
Iraqi economy through increasing both the government expenditure and GDP.
The government’s role has become limited; just spend money without tracking effects
which can be leave it on the economic activities and social situation. There isn't a specific
fiscal policy which deal with the economic variables and what the economic and the society
needs exactly. Besides, Iraq has suffered from a high level of corruption and unsuitable
allocation of government expenditure on ministries. All these make the government
expenditure characterized as unproductively.
The results do, in all, suggest that;
This study has strongly recommended that the Iraqi government should determine its
intervention and size in the economy, and its intervention should be in the specific area,
necessary, and for limited period.
Iraqi government with an appropriate expenditure policy can provide a suitable
infrastructure and environment for rebuilding the society and economy.
17
Iraqi government must start drastically to tackle corruption effectively in whole of the
government agencies, by (i) adopting global ethical standards beyond what the law
requires (e.g. no bribery in either public or private sectors anywhere); (ii) fostering
employee awareness, knowledge and commitment through stimulating, systematic
education and training.
Re-allocated for the expenditure concerning to function, with focus on the important of
this expenditure especially infrastructure expenditure.
Iraqi government should re-evaluation its fiscal in order to advancement the society and
economy.
The Iraqi government should allow to private sector to grow up in the economy by
cooperation with it, through Private-Public Partnership (PPP) strategy. The government
will remove a big burden from the budget in order to reduce the expenditure and deficit.
The Author:
Dr. Emad M.A. Abdullatif obtained his M.A. and Ph.D. in Financial Economics from
Baghdad University. He is currently Assistant Professor of Financial Economics at Baghdad
University.
Dr. Emad’s research interests focus on Public Finance issues in general, with special
references to government expenditure and government securities market.
This paper is one the result of post-doctoral scholarship at the Center for Iraq Studies (CIS),
Friedrich-Alexander-University Erlangen-Nuremberg, Germany, form Sep. 2010- Aug. 2011.
18
Appendix:
Appendix 1: The allocation schemes* of government current expenditure on ministries in
Iraq (2006-2010) (Billion IQD)
Ministries
Fiscal Year
2006 2007 2008 2009 2010
Council of Representative
514.196
546.334
605.075
533.845
514.702
Republic Presidency
107.751
132.421
153.221
104.643
82.312
Council of Ministers
252.354
1006.703
1745.599
1154133
136.2157
Ministry of Defence
4663.702
5158.030
5915.452
4549.869
5277.846
Ministry of Interior
2834.939
4054.920
6416.383
6338.333
6960.076
Ministry of Justice
95.298
187.655
294.597
312.977
544.225
Ministry of Foreign Affairs
135.042
271.760
303.441
308.002
362837
Ministry of Health
1557.734
1904.905
3010.406
3918.806
4657.968
Ministry of Education
1570.597
2114.204
3857.873
5062.456
5026.874
Ministry of Higher Education and
Scintific Research
614.474
866.607
1427.499
2096.044
2196.350
Ministry of Transportation
199.078
197.349
619.107
250.262
399.735
Ministry of Communication
41.909
46.269
79.844
106.537
80.039
Ministry of Oil
4614.787
1266.556
1090.093
1131.728
1642.091
Ministry of Electricity
1006.585
1198.202
3950.256
2727.015
2801.805
Ministry of Municipalities and
Public Works
254.344
291.126
782.228
575.044
850.774
Ministry of Water Resources
94.023
129.498
181.948
223.639
237.020
Ministry of Finance
11120.125
8640.678
14053.901
10076.828
11752.308
Ministry of Trade
4531.760
3969.175
7049.580
4279916
4716.430
Ministry of Construction and
Housing
125.699
150.042
225.613
263.214
258.376
Ministry of Agriculture
400.632
352.286
696.315
498.663
556.419
Ministry of Industry and Minarals
332.778
45.142
310.770
946.211
158.623
Ministry of Labour and Social
Affairs
224.326
987.777
1387213
980.927
1097.548
Ministry of Planning and
Development Cooperation
90.275
165.213
184.202
134.006
239.394
Ministry of Youth and Sport
35.982
49.262
69.945
77.957
95.225
Ministry of Culture
59.309
75.221
122.952
132.466
179.402
Ministry of Environment
10.544
11.673
20.983
40.137
69.044
Ministry of Migration and displaced
6.627
47.977
274.915
82.851
211.800
Ministry of Human Rights
14.106
15.149
20.780
15.493
29.477
Ministry of Science and Technology
67.759
63.334
101.115
112.956
112.250
∑ current expenditure
39486.065
38435.573
61099.828
54119.503
60993.185
Source: Ministry of Finance, Iraqi government Budget, available at,
http://www.mof.gov.iq/ar/index.php?name=News&file=article&sid=918
* exception 17% of government budget for the region of Kurdistan in the north of Iraq
19
Appendix 2: The allocation schemes* of government Investment expenditure on ministries in
Iraq (2006-2010) (Billion IQD)
Ministries
Fiscal Year
2006 2007 2008 2009 2010
Council of Representative
11.000
6.250
8.110
6.800
7.041
Republic Presidency
000
000
000
000
14.000
Council of Ministers
18.450
395.939
1127.421
273.957
471.560
Ministry of Defence
500.000
60.000
492.399
214.500
445.500
Ministry of Interior
99.777
50.000
702.150
216.296
312.200
Ministry of Justice
10.500
7.250
27.824
21.250
21.228
Ministry of Foreign Affairs
9.592
58.557
61.675
117.500
91.700
Ministry of Health
50.000
99.650
142.263
510.203
1139.620
Ministry of Education
28.400
358.810
481.183
283.798
503.897
Ministry of Higher Education and
Scintific Research
60.000
258.971
463.819
278.655
411.577
Ministry of Transportation
154.403
133.200
408.254
382.500
450.000
Ministry of Communication
248.000
192.800
379.485
255.000
439.119
Ministry of Oil
4566.650
2875.000
3854.602
2603.550
3103.550
Ministry of Electricity
1740.850
1745.055
4709.128
1378.134
4193.768
Ministry of Municipalities and
Public Works
551.929
618.800
1448.013
628.707
1547.096
Ministry of Water Resources
299.703
329.820
964.280
679.748
1153.388
Ministry of Finance
244.096
450.243
1183.754
678.732
1525.183
Ministry of Trade
18.500
23.750
59.067
55.000
91.438
Ministry of Construction and
Housing
326.617
393.858
589.314
534.319
770.661
Ministry of Agriculture
36.324
62.816
95.400
185.730
204.000
Ministry of Industry and Minarals
14.497
41.725
697.090
1077.830
921.024
Ministry of Labour and Social
Affairs
20.000
138.750
22.505
16.875
24.711
Ministry of Planning and
Development Cooperation
38.300
100.000
116.317
51.000
66.576
Ministry of Youth and Sport
16.000
37.500
125.225
195.764
550.000
Ministry of Culture
19.900
25.775
43.537
25.701
42.509
Ministry of Environment
7.075
6.000
12.564
12.750
20.740
Ministry of Migration and displaced
2.000
1.000
1.629
6.800
18.194
Ministry of Human Rights
3.000
2.000
5.712
5.025
10.000
Ministry of Science and Technology
18.529
16.242
36.496
17.925
30.455
∑ Investment expenditure
11477.095
15236.264
30584.111
15608.693
24859.515
Source: Ministry of Finance, Iraqi government Budget, available at,
http://www.mof.gov.iq/ar/index.php?name=News&file=article&sid=918
*exception 17% of government budget for the region of Kurdistan in the north of Iraq
20
Appendix 3: The allocation schemes* of Total government expenditure on ministries in Iraq
(2006-2010) (Billion IQD)
Ministries
Fiscal Year
2006 2007 2008 2009 2010
Council of Representative
525.195
552.585
613.185
540.645
521.744
Republic Presidency
107.751
132.421
153.221
104643
96.312
Council of Ministers
270.804
1402.643
2873.020
1428.091
1833.717
Ministry of Defence
5163.702
5218.030
6407.851
4764.369
5723.346
Ministry of Interior
2934.717
4104.921
7118.534
6554.629
7272.276
Ministry of Justice
105.798
194.906
322.421
334.227
565.453
Ministry of Foreign Affairs
144.635
330.317
365.116
425.502
454.537
Ministry of Health
1607.734
2004.555
3152.669
4429.010
5797.588
Ministry of Education
1598.997
2473.014
4339.057
5346.254
5530.772
Ministry of Higher Education and
Scientific Research
674.474
1125.578
1891.319
2374.699
2607.927
Ministry of Transportation
353.482
330.550
1027.362
632.762
849.735
Ministry of Communication
289.909
239.069
459.329
361.537
519.158
Ministry of Oil
9181.437
4141.557
4944.695
3735.278
4745.641
Ministry of Electricity
2747.435
2943.258
8659.385
4105.149
6995.573
Ministry of Municipalities and
Public Works
806.273
909.926
2230.242
1203.751
2397.870
Ministry of Water Resources
393.727
459.319
1146.228
903.388
1390.409
Ministry of Finance
11364.222
9090.922
15237.655
10755.560
13277.492
Ministry of Trade
4550.260
3992.925
7108.647
4334.916
4807.868
Ministry of Construction and
Housing
452.316
543.900
814.928
797.533
1029.037
Ministry of Agriculture
436.956
415.102
791.715
684.393
760.419
Ministry of Industry and Minarals
347.275
86.868
1007.861
2024.041
1079.647
Ministry of Labour and Social
Affairs
244.326
1126.528
1409.719
997.802
1122.260
Ministry of Planning and
Development Cooperation
128.575
265.213
300.519
185.006
305.971
Ministry of Youth and Sport
51.982
86.763
195.170
273.722
645.225
Ministry of Culture
79.209
100.997
166.490
158.168
221.912
Ministry of Environment
17.619
17.674
33.547
52.887
89.785
Ministry of Migration and
displaced
8.627
48.977
276.545
89.651
229.994
Ministry of Human Rights
17.106
17.150
26.492
20.518
39.477
Ministry of Science and
Technology
86.288
79.576
137.611
130.882
142.705
∑ Total Government expenditure
50963.161
53671.837
91683.939
69728.196
85852.701
Source: Ministry of Finance, Iraqi government Budget, available at,
http://www.mof.gov.iq/ar/index.php?name=News&file=article&sid=918
*exception 17% of total government budget for the region of Kurdistan in the north of Iraq.
21
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