Debt: No one is innocent

تم نشره في Thu 25 June / Jun 2015. 02:17 PM

By Jumana Ghunaimat

Some seek to minimize the risk of public debt, through attempts to reduce the burden of its size, so it looks modest.

The justification may be attempts to mitigate the responsibility of the current government for the surge in debt, to provide explanations for what has led to big jump in it that is presented as attempts to cover the high costs of current expenditure in the budget, and the payment of the goods and services subsidies.

No one denies that a large part of the debt was largely the result of the electricity bill, in addition to water, bread and other subsidies to a lesser degree. But the result remains that the public debt, both domestic and external, is a dangerous indicator, giving the its high number compared to the size of the country and its resources.

During the current year, it is forecasted that debt will rise by about two billion dinars. The issuance of Eurobonds, at the US price, $1.5 billion, will lead to an increase in public debt on Thursday, from 21.1 billion dinars to 22.1 billion dinars.

Another justification for borrowing during the current year, related to the entitlement of the payment of foreign bonds in October, which were issued by the former Minister of Finance Dr. Mohammad Abu Hammour, in 2010 during the government of Samir Rifai, at $750 million, and at a fixed annual interest rate of 3.875%, payable semi-annually throughout the life of the bonds.

Hence, it is true that the phenomenon of inflation in indebtedness manifested itself with the current government, but it is certainly not alone in bearing the responsibility for this threat, as shown by the bonds to be repaid today and were borrowed during the government Rifai.

The most serious decision that caused borrowing chaos was also taken during the Rifai government, as work on Articles 22 and 23 of the Public Debt Law and its administration was halted. Article 23 specifically states, that "...outstanding balance of public debt shall not exceed at 60% of the GDP...".

Before that, Jordan had finished 2004 after an economic reform program with a benign level of debt. However, all governments expansion in spending, without thinking of the resources, inched the debt up gradually, until the global financial crisis came and added insult to injury. Then the difficult conditions persisted and became more complicated with the so-called Arab Spring and the accompanying disruptions in Egyptian gas. Additionally, the purchase of the Paris Club in 2006 reduced the external debt, but it also rebounded.

The consequences of Egyptian gas outages linger even until today, despite the decline in it. Jordan was lucky, the officials and people, that oil prices dropped significantly, easing the burden of electricity subsidies, without that meaning that dealing with the debt has become easy.

In a nutshell, a head of government who took over after the economic reform program should not be criticizing the high debt; everyone partnered in creating the problem and everyone contributed in his own way to increasing the size of the debt. The reason is the absence of real vision and planning for the present and future of the country.



This article is an edited translation from the Arabic edition