Whenever the
Ministry of Finance publishes its monthly
bulletin, both the public and the media start raising the inevitable and
ever-lasting question: Where is the public debt issue heading?
اضافة اعلان
Everyone deems public debt reaching $47 billion, 107 percent
of GDP, as an alarming indicator indeed. These indicators, be it total figures
or rates, are not safe at all; not due to their large volume and percentage,
but due to other economic reasons worth highlighting.
The danger of indebtedness is that it is increasing during a
period of poor economic growth. It’s not growth, in fact, but decline, meaning
that the economy is unable to generate income.
In
Jordan, the annual interest on public debt amounts to
more than JD1.45 billion. The Treasury also grapples to cover loan installments
and both internal and external liabilities, nearing JD6 billion every year, and
it is now heading towards borrowing to cover the payment of other loans, which
answers the question of why Jordan’s public debt never goes down.
The government cannot possibly lower its public debt rate given
this poor economic performance. Negative growth creates new burdens for the
Treasury, which has already lost a significant portion of its income generated
from strategic economic activities, such as tourism, investment inflows, and remittances.
Even the poor growth achieved before the pandemic, which
reached 2 percent at best, would never be sufficient for the appropriations necessary
to address internal and external debt.
The issue is not new, and the current government cannot be
held accountable for it, as some previous governments, such as Abdullah Ensour’s,
contributed to a mad increase in public debt during its four-year reign,
amounting to JD8 billion. This debt increase came despite Jordan receiving the
largest financial support package in the country’s history — totaling $3.67
billion — from the Gulf grant and other financial aid, enjoying a 70-percent
drop in oil prices in the second half of 2014, and the cancellation of all fuel
subsidies except for cooking gas cylinders.
However, the economic management of this particular government
was literally catastrophic, leaving behind an economic disaster to be paid for
by consecutive generations. That government even had JD1.3 billion in liabilities
and outstanding dues carried over to the next government.
This proves that a large portion of debt growth, and the
reason it has reached unsafe levels, is due to poor management and an absence
of accountability rather than regional crises and their repercussions.
The absence of financial control over public expenditures
over the past years led to a huge increase in those expenditures. It has now
become the responsibility of the Treasury to provide allocations for the
government to secure its operational expenses at all costs. The best examples
of this are socioeconomic transformation projects, which used to be financed
through independent programs separate from the Treasury, at a cost of no less
than $750 million. These projects were then inserted into the general budget in
bulk after 2005, and they became an integral part of public expenditures, thereby
doubling the Treasury’s liabilities. The majority of those expenses did not add
significant value to the national economy. This pushed the government at the
time to borrow internally or externally to cover the Treasury’s rising
financing needs.
The government is in desperate need for bold decisions to
accelerate domestic economic momentum. This must come in parallel with
enhancing the business investment climate, reforming the administrative system,
setting up a road map for public-private partnership projects, and letting the
private sector — which has more operational and growth capacity — take the lead
on economic growth.
Only then will the Treasury generate new income, enabling it
to comfortably fulfill its obligations. The Treasury can then move towards
borrowing for operational and investment purposes, rather than covering its current
expenditures, which, unfortunately, is the case today.
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