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Volume :23 Issue : 2 2016      Add To Cart                                                                    Download

Debt Sustainability in Jordan

Auther : Mohammed M. Ajlouni
Mohammed A.Khataybeh

This study aims at measuring the real level of public debt in Jordan and assessing its, status quo, sustainability. The purpose is to determine the burden of debt on the economy and the likelihood level of sustainability, which would not affect foreign exchange rate, interest rate or economic growth. The model used in this study takes into consideration basic measures of public debt. These are: GDP, as a relative size measure; government expenditures (current and capital) and interest paid from expenses side; and taxes, new loans and changes in cash holdings from revenues during the period 2000-2011. The results show that public debt discount rate decreased from 102% in 2000 to 99% in 2011. Furthermore, the real level of Jordanian public debt declined significantly from 104% to 53% due to the fall of external debt during the study period from 89% to 18%. However, local debt jumped from 10% in 2000 to 28% in 2011. Thus, Jordanian local and external debt is sustainable, and has no significant burden on Jordanian economy. These results should help in planning and funding of macro-economic policies, in the short and medium terms. The results might also be considered as the fifth factor that leads to a country's fall in financial distress. That is, both foreign and total debts of a country should not exceed certain ratios relative to GDP.

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Nov 19, 2019

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