The impact of fiscal policy on the efficiency of banking performance for the period (2015-2022)

Abstract

This research aims to analyze and measure the impact of fiscal policy on banking performance efficiency during the period 2015–2022. It examines the relationship between fiscal policy instruments—namely, government spending, public revenues, and budget deficits or surpluses—and banking performance indicators such as profitability, liquidity, capital adequacy, and credit quality. The study's significance stems from the vital role fiscal policy plays in influencing economic activity and the banking sector, a cornerstone of the financial system.

The study employs a descriptive-analytical approach to present the theoretical framework related to fiscal policy and banking performance efficiency. It also utilizes econometric methods to analyze annual data over the study period, aiming to reveal the nature of the relationship between fiscal policy variables and banking performance indicators.

The study concludes that fiscal policy has a significant impact on banking performance efficiency. Expanded government spending and improved public revenues contribute to increased economic activity, which positively impacts bank credit volume and profitability. Furthermore, the results demonstrate that financial stability and reduced budget deficits enhance banks' ability to achieve higher levels of efficiency and financial stability. The study recommended the need for coordination of economic policies, particularly between fiscal and monetary policy, to enhance economic stability and support the efficiency of the banking sector, in addition to encouraging financial reforms that contribute to developing the banking environment and improving bank performance.