Impact crowding out of the public sector in an exuberance of oil revenue on credit to the private sector for the period(2004-2024)

Abstract

This paper investigates the impact of public sector crowding out on private sector in a way that the Iraqi economy is heavily reliant on oil as a main source in financing its budget, subjecting it to volatility in global oil prices, and hence we analyze the path of credit provision to government and to private sector as well as analyze the causes and the upward trend in the domestic debt during the period (2004-2024), using the official publications and reports of the Iraqi central bank and as well as some literatures, The study found evidence on the crowding effect as consequence of the Iraqi government to the domestic borrowing because of oil shock, and increasing government spending, an upsurge in domestic debt over the duration of study even with an increase in oil revenue in different years; increased levels of credit extended to government at rates nearly equal the credit extended to private sector which undermine the effectiveness of commercial banking. The researcher suggested to diversify sources of national income and reliance on local resources in activating the role of the other sectors of economy, and the support private sector, to participate in the economic development and attain good growth rates, and to reduce over-reliance on domestic borrowing, and to develop other developmental models through strategic planning.