More Debt, Little Growth

The Ensour government likes to crow about its achievements. But I can’t see any, beyond boosting the national debt to new highs with little to show for it.

The Economist- Yusuf Mansur

The national debt increased by the end of May to JD19.9 billion, or 77.8 percent of the GDP. In effect, the debt grew by JD824 million, or JD162 million per month. Meanwhile, neither economic growth is happening nor jobs are being created as a result of this debt. The growth rate isn’t expected to surpass its rate over 2013; and the unemployment rate, which is still at 12 percent, is likely to rise again by the end of the year. Clearly, there’s little correlation between government spending and growth or unemployment.

The unemployment rate is especially important since 52.8 percent of the unemployed have passed the General High School Exam (Tawjihi), unemployment amongst males who hold a bachelor’s degree or higher is 20.8 percent, and amongst female university graduates, it was nearly 82 percent.

Interestingly, unemployment increased by 0.2 percent in the second quarter from the first quarter of the year. In gender terms, the unemployment rate for males has reached 10.4 percent, while it’s almost double that for females at 20.1 percent. Furthermore, the male unemployment rate has increased by 0.7 percent although it decreased for females by 1.7 percent from the first quarter of the year. The numbers, which are alarming by any standard, indicate a lack of achievement by the government in spite of its growing mountain of debt.

The government has been borrowing from everywhere and basically exhausting all lending avenues, or at least the ones currently available. Still, and in spite of JD2.867 billion in revenues (including borrowing and grants) in the first five months of the year, the government has racked up a deficit of JD206 million. The increase in deficit was due to increased current expenditures by JD301 million, while the capital expenditures, which are badly needed, only increased by JD39 million. So the government can’t really claim curbing the deficit while it’s growing the debt and the economy is still shaky.

In all, it’s as if there’s a bizarre and damaging adversarial relationship being fought in Jordan between the fiscal policy, administered by the Ministry of Finance, and the economy at large.