magazine of college Administration&Economics for economic & administration & financial studies

public spending is one of the most crucial financial instruments governments use to influence economic activity. It contributes to economic growth by funding investment projects and providing public services. The significance of this research stems from the critical role of public spending in affecting banking credit and its impact on the country\'s economic activity. Public spending serves as the primary fiscal policy tool that enables the government to achieve economic growth and stability, particularly in Iraq\'s rentier economy, which heavily relies on oil revenues subject to price fluctuations in global markets. The research problem focuses on the weakness of public spending policies in addressing economic and financial fluctuations and their negative impact on the banking sector\'s ability to provide the necessary credit for financing developmental economic activities. This challenge is further exacerbated by dependence on oil revenues, which are directly influenced by changes in global oil prices. This study aims to examine the structure of public spending and the components of banking credit in Iraq for the period 2009–2023, analyze the impact of public spending on banking credit, and determine the nature of their relationship—whether reciprocal or unidirectional. The proposed hypothesis suggests a statistically significant impact of public spending on banking credit during the specified period. To achieve the study\'s objectives, various econometric tests were conducted. The results of the Granger causality test indicate that public spending does not directly cause banking credit. However, since the value is close to the critical threshold, it suggests a weak causal effect of public spending on banking credit. Conversely, banking credit does not cause public spending, as indicated by the high p-value.