The Relationship Between Public Debt and Fiscal Sustainability: An Econometric Study for the Period (2004–2023)

This study aims to analyze the relationship between public debt and fiscal sustainability in Iraq during the period (2004–2023), considering the economic and financial fluctuations experienced by the Iraqi economy as a rentier economy that relies heavily on oil revenues. The study adopts a quantitative approach using annual time-series data, alongside a descriptive-analytical approach to interpret financial and economic developments. The Autoregressive Distributed Lag (ARDL) methodology was employed after verifying the properties of the time series using the Augmented Dickey–Fuller (ADF) test. The results of the bounds testing approach indicated the existence of a long-run equilibrium relationship between public debt and oil revenues, non-oil revenues, gross domestic product (GDP), and the general budget deficit. The results of the error correction model further showed that short-run disequilibria in public debt are rapidly adjusted toward the long-run equilibrium. The study concludes that the continued reliance on oil revenues and the high level of fiscal deficits constitute two main factors contributing to the exacerbation of public debt, thereby constraining the achievement of genuine fiscal sustainability. Accordingly, the study recommends diversifying revenue sources, strengthening fiscal discipline, and adopting an effective public debt management strategy that supports long-term financial stability.