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Jordan’s public debt to rise to 117.9% of GDP — WB

Experts blame COVID-19, Ukraine war, energy prices

world bank wb
(File photo: Jordan News)
AMMAN — In its Global Economic Prospects report, the World Bank (WB) predicts that Jordan’s public debt will rise gradually from 115.6 percent of GDP this year to 117.9 percent in 2024.اضافة اعلان

According to the report, issued on Wednesday, the public debt to GDP, which reached 113.7 percent last year, may climb to 116.9 percent next year.

The report indicated that the rate of net public debt to the GDP, excluding social security debt, reached 91.9 percent last year, and is expected to rise in the current and next year to 92.6 percent, and then decline to 91.8 percent in 2024.

Moreover, the financial pressure from losses in the electricity and water sectors will lead to an increase in the total public debt to 115.8 percent of GDP in the current year (excluding the debt of the Social Security Investment Fund, it reaches 92.8 percent).

Domestic revenues grew by 10 percent, driven by an increase in taxes on income and profits levied on companies. The ratio of public debt to GDP amounted to about 113.7 percent at the end of last year, and reached JD37.1 billion last May, a 1.5 percent growth.

Economist Jawad Al-Anani said that the World Bank report is not surprising, for several reasons, “including that Jordan owes large amounts of money to the World Bank, the existence of regional conflicts, and the decrease in foreign capital flows to Jordan”.

Anani told Jordan News that despite the improvement in Jordanian exports, especially in the fertilizer sector, “the increase in imports was higher, and this widened the trade deficit, and was reflected in the decrease in foreign reserves.”

Anani added that the rise of public debt is a reflection of the Russian-Ukrainian crisis and the repercussions of the COVID-19 pandemic, “as there was a disruption in the supply chains, which was the main reason for the rise in prices”.

“As for the Russia-Ukraine crisis, it led to economic sanctions being imposed on countries, and therefore, gas prices witnessed a threefold increase,” he added.

Anani stressed that while a good legislative investment framework is necessary, it, alone, is not sufficient.

According to Anani, what is required is to reach understandings with investors, including with Arab investors, and improve the investment environment by, for example, opening special window at airports and facilitating the investors’ transactions at government departments.

He also suggested providing advisory services to investors, in addition to improving the ability to negotiate with investors.

Economist Wajdi Makhamreh said that the rise in public debt ration to GDP is logical for several reasons, “most notably the high costs of water and electricity, part of which is still subsidized, and corruption and theft”.

He added: “The high indebtedness of the water and electricity sector, which amounts to approximately JD7.5 billion, and increases the burden of public debt, and the high interest rates globally increased the interest on government domestic and international debt.”

Political economy specialist Zayan Zawaneh told Jordan News that the nature of public debt, with the ensuing increasing costs, the way it is managed, “represents one of the most important weaknesses of the government, especially if we add to the World Bank report the diplomatic disclosures of the International Monetary Fund and the European Bank for Reconstruction reports”.

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