Abstract

The Public budget deficit and the exchange rate are indicators with a clear impact on the level of economic activity and the means used when adopting one of the monetary and fiscal policies to stimulate the national economy.The research problem is represented in the confusion in the decisions taken by the government to raise and lower the Iraqi dinar against the dollar and its negative effects in terms of economic and social.The research hypotheses came to the fact that the devaluation of the dinar is a step in the right direction and has a positive impact on the Iraqi economy at the present time and in the future, but its timing and size are not appropriate. Confusion and lack of confidence in the currency. The last hypothesis is the existence of a reciprocal relationship between the exchange rate and the general budget deficit.The objectives of the research were to identify the reality of the Iraqi economy and the exchange system used and come up with some recommendations that may contribute to correcting the course of the collapsed Iraqi economy.The study concluded that there are two options for the Iraqi economy:The first: to continuation with the rentier consumption behavior and deterioration of development, and the depletion of Iraq's economic future.Second: development option is the right national choice that has no alternative in building the future of the Iraqi economy and social.The research hypotheses have been proven, with the exception of the absence of a reciprocal relationship between the exchange rate and the budget deficit, but rather the existence of a one-way relationship from the budget deficit towards the exchange rate.