Fiscal Dynamics in Selected OIC Countries Amid the COVID-19 Pandemic: Evidence from an Islamic Economics Perspective
DOI:
https://doi.org/10.53840/ijiefer310Keywords:
Public Finance, Panel VAR, COVID-19, OIC Countries, Islamic EconomicsAbstract
Purpose – This study examines fiscal dynamics in OIC countries over the period 2000–2025, with particular attention to the fiscal implications of the COVID-19 pandemic from an Islamic economics perspective. It investigates the dynamic relationships among public debt, government health expenditure, and other key fiscal and macroeconomic variables, and considers their implications for fiscal dynamics and the responsibility to preserve fiscal capacity for future generations.
Design/Methodology/Approach – The study uses panel data for OIC countries (2000–2025) and applies a Panel Vector Autoregression (PVAR) model. Granger causality tests, impulse response functions, and mean comparison tests are also conducted.
Findings – Results show strong persistence in fiscal variables. Public debt affects health expenditure depending on the influence of health spending on GDP. Debt shocks negatively affect primary balance, while COVID-19 significantly worsened fiscal conditions and increased debt, with no significant rise in health expenditure.
Originality/Value – The study links fiscal dynamics and Islamic economics in OIC countries during COVID-19. It highlights the role of Sukuk and Zakat as sustainable healthcare financing tools.
Research Limitations/Implications – Limitations include data availability and heterogeneity across OIC countries. Future studies may focus on country-specific or comparative analyses.
Practical Implications – Policymakers should improve spending efficiency, strengthen transparency, and build fiscal reserves. Islamic financial instruments can support sustainable healthcare financing and long-term fiscal stability.
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