The Impact of Public Debt on Exchange Rate Stability in Iraq (2004–2023)

The relationship between monetary and fiscal variables is of critical importance, particularly when it influences the trajectory of economic policy. Public debt in Iraq has emerged as a chronic issue, placing a significant burden on the country's fiscal performance. A key monetary variable highlighting the Iraqi economy's weakened financial strength is the exchange rate; this serves as the primary mechanism through which the Central Bank effectively manages foreign currency operations, and fluctuations in the supply of foreign currency entail both positive and negative consequences. This research examines the principal theories regarding the variables in question, concluding that inflationary effects play a significant role in exacerbating the public debt crisis within the Iraqi economy. The findings also indicate that any increase in public debt directly contributes to the depreciation of the local currency against foreign currencies; specifically, a rise in borrowing levels expands liquidity, thereby impacting the currency's value.