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The Effects of Fiscal Policy on Inequality and Poverty in Iraq

Author

Listed:
  • Amjad,Beenish
  • Cabrera,Maynor Vinicio
  • Phadera,Lokendra

Abstract

This study assesses the distributional impacts of public expenditures and taxes on poverty and inequality in the Republic of Iraq. The analysis uses the Commitment to Equity methodology and is based on the survey and government fiscal administrative data for fiscal year 2017. Results from the analysis show that Iraq’s fiscal policy is modestly progressive. It reduces short-term inequality by 6.7 and 3.0 Gini points with and without including public spending on education and health services. Both results are less than the global and upper-middle-income country averages. However, driven by direct transfers from poverty targeted social safety net cash transfers and generous pension allowances, the fiscal system reduces short-term poverty by 5 percentage points when evaluated using the international poverty line of US$5.5. This is one of the largest in the global and upper-middle-income country databases. These positive short-term results are achieved primarily because households pay almost no taxes. Iraq’s tax revenues are far lower than even the lower-income countries’ average. Unlike in most countries, Iraqi households in all quintiles, even the richest, are net beneficiaries of the fiscal policy. Given oil price volatility and the global movement away from fossil fuels, the high oil dependence and lack of a broader revenue base pose a significant fiscal sustainability challenge in Iraq.

Suggested Citation

  • Amjad,Beenish & Cabrera,Maynor Vinicio & Phadera,Lokendra, 2023. "The Effects of Fiscal Policy on Inequality and Poverty in Iraq," Policy Research Working Paper Series 10588, The World Bank.
  • Handle: RePEc:wbk:wbrwps:10588
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    References listed on IDEAS

    as
    1. Nandini Krishnan & Sergio Olivieri & Racha Ramadan, 2019. "Estimating the Welfare Costs of Reforming the Iraq Public Distribution System: A Mixed Demand Approach," Journal of Development Studies, Taylor & Francis Journals, vol. 55(S1), pages 91-106, December.
    2. Frisvold, David E., 2015. "Nutrition and cognitive achievement: An evaluation of the School Breakfast Program," Journal of Public Economics, Elsevier, vol. 124(C), pages 91-104.
    3. Phadera,Lokendra & Sharma,Dhiraj & Wai-Poi,Matthew Grant, 2020. "Iraq's Universal Public Distribution System : Utilization and Impacts During Displacement," Policy Research Working Paper Series 9155, The World Bank.
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