An accounting analysis of the determinants of capital expenditure in Iraq: An empirical study of the relationship between oil revenues, fiscal deficit, and GDP (2022-2004)

Abstract

This study aims to analyze some of the accounting factors that determine capital expenditure in Iraq during the period 2004–2022 by examining the applied relationship between capital expenditure and oil revenues, the fiscal deficit, and GDP. The study relied on original annual data extracted from official government sources, including the Ministry of Finance, the Ministry of Planning, and the Central Bank of Iraq, which were processed and converted into tables suitable for quantitative analysis. To achieve the research objectives, multiple regression models and annual elasticity analysis were used to estimate the impact of independent variables on capital expenditure, while also testing the significance and direction of the relationships. The results showed a strong and positive correlation between capital expenditure and oil revenues, reflecting the rentier nature of public spending in Iraq and confirming the state's near-total dependence on the oil sector as a primary source of funding. The findings also revealed the negative impact of the budget deficit on capital spending, while the study showed a slight effect of GDP growth on increasing capital expenditure, indicating the weak role of non-oil sectors in supporting public spending. The study recommends adopting fiscal policies aimed at diversifying public revenue sources by activating the role of non-oil productive sectors, such as agriculture, manufacturing, tourism, and trade. This would contribute to reducing dependence on oil, achieving stability and sustainability in capital spending, and enhancing its efficiency in supporting economic development.