Expanding production base can help reduce public debt, says expert

(File photo: Jordan News)
AMMAN — Jordan’s public debt has jumped by 1.6 percent in the first half of 2022, reaching 88.4 percent of the country’s GDP, according to statistics by the Ministry of Finance.

The data, published on the ministry’s website, shows that the total public debt reached JD36.5 billion in this period; of this, JD13.89 billion is internal debt and JD15.26 billion is external debt.

According to economic expert Fahmi Al–Katout, “the public debt-to-GDP ratio that has been announced by the government is not accurate. It actually surpasses 110 percent when the government’s debt to the Social Security Corporation (SSC) is calculated as well”.

He said that “the government owes around JD7 billion to the SSC, and ignoring this number is an underestimation of the Jordanian people’s debts because the SSC is owned by the Jordanian people, it is not a sovereign institution”.

Katout pointed out that “the increasing public debt would cost the country’s economy heavily. The annual cost of debt is estimated at over JD1.6 billion, roughly equivalent to what the country spends on education and health”.

“The higher the public debt gets, the worse services Jordanians have,” he added.

According to Katout, “the higher debt will also affect Jordan’s solvency, as it will increase the interest on any further loans”.

He said that the government has to decrease its dependency on taxes and work on improving the economy and investment, which would help lower the unemployment rate and help the economy grow.

“Neither this government nor any other government can lower the public debt, or even stop it from increasing, but this does not mean that there are no solutions,” he said.

Economic expert Mufleh Aqel told Jordan News that the constant increase in public debt is due to spending more than incoming money.

“Other reasons may include the increased cost of interest and delayed aid, but the main reason is the excess of expenditure over income,” he reiterated, stressing that “controlling the public debt will not be possible without a sharp decrease in expenditure”.

Jordan’s current expenditure are projected to stand at JD9.117 billion, 65 percent of which will go for public sector salaries, according to the Ministry of Finance.

“The government cannot cut wages to reduce expenditure, because wages are already insufficient, in light of the high inflation rate, but it can freeze wages for two or three years,” suggested Aqel.

“Even this (wage freeze) would add to the burden on people,” Aqel said.

“Our only choice is to depend on our own resources. We hope that the new economic plan would include methods to improve the country’s income. The only exit for us is to expand the production base to reduce the deficit.” اضافة اعلان



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