Fiscal policy in oil economies often adopts a special pattern that tends to keep pace with oil prices at the expense of efficiency and effectiveness, which weakens the flexibility of fiscal policy instruments in responding to the requirements of economic development and achieving the goals of stability, justice and well-being. The sharp drop in crude oil prices in mid-2014 provided an opportunity for most oil countries to address and sterilize the effects of excessive oil addiction in financing the budget and the national economy. Iraq’s public finances should be restructured and designed in accordance with economic and financial reform programs and co-exist with declining oil revenues and maximizing alternative resources. Therefore, the design of a new framework for fiscal policy instruments is of paramount importance, not only to isolate the impact of oil price fluctuations from macroeconomic trends, but also to implement building and reconstruction programs, growth and sustainable economic stability. In this context, the research attempts to dismantle and discuss the main imbalances left by oil hegemony on the budget items and the impact on the macroeconomic activity in the country, in order to find appropriate economic approaches and policies that restore the effectiveness of fiscal instruments and ensure fiscal sustainability in the medium and long term.

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