Dr. Ali Abdulrahim Al-Aboudi / Al-Nahrain University – International Economic Relations
The general budget is the most critical component of economic and social reform efforts in all countries. For this reason, nations have placed great importance on how the state’s financial budget is managed and the proper methodology for preparing it. Consequently, governments have sought budgetary systems that can help them achieve their diverse objectives. With the advancement of economic analysis methods and technological tools for data and information gathering, the approach to preparing, managing, and executing the general budget has evolved significantly. Budgeting has moved beyond merely monitoring expenditures to include planning, programming, and active management.
As a result, various types of budgets have emerged, differing in terms of their sophistication and methods of preparation and management. Among these, international experience has shown that program and performance budgeting is the most successful approach for preparing and implementing financial budgets—especially in countries undergoing transitional phases of economic transformation.
In Iraq’s case, however, the country still relies on the oldest method of preparing, executing, and monitoring the state’s financial budget: the line-item budget. The Iraqi budget remains governed by the principles of this traditional model, which has been in use since the first budget was prepared. While Iraq’s adoption of this conventional approach had its justifications in the past—such as achieving a degree of political acceptance—circumstances have changed. With the development of economic and financial sciences, and as most countries move away from outdated budgeting methods toward more modern systems, Iraq must reconsider its approach.
The continued reliance on the line-item budget has produced numerous negative consequences, including the squandering of public funds, a lack of tangible achievements, and stifling administrative bureaucracy. Thus, the time has come for Iraq to adopt a new methodology for preparing and managing its general budget. This policy paper advocates for the adoption of program and performance budgeting as the most suitable method for Iraq’s current context, and as one of the most effective fiscal reform tools to support good governance in the country.
However, before addressing the importance and methodology of transitioning from line-item budgeting to program and performance budgeting in Iraq, it is essential to examine the philosophy behind both approaches, their respective advantages and disadvantages, and to present a comprehensive overview of the current methodology used in preparing Iraq’s budget.
