Daily Times

The draft budget for 2017 indicates that the total interest payable on local and foreign debt will reach JD1 billion, and that the principal installments on foreign debt, which will come due in 2017, will reach JD714 million. Thus, the cost of debt service will be around JD1,714 million, enough to consume almost one quarter of the estimated domestic revenue – a huge burden. The major part of this amount will be transferred abroad in foreign currency. At this stage, one can say that public debt service reached a level that forms a big burden not only on the budget, but also on the balance of payments and the Central Bank reserves of foreign exchange.

In other words, almost one quarter of the taxes payable by the citizens will go to lenders. There is, of course, a difference between paying interest on foreign loans, which must be transferred abroad in foreign exchange, and paying interest on domestic debt, in local currency, which will be recycled within the national economy. Another difference exists between foreign loans that need a country to earn the needed amounts in foreign exchange to repay principal and interest, and local loans, denominated in dinars, which the Treasury can roll over automatically. Repayment of a local loan can simply be done by the issuance of a new local loan of equal amount. The financing budget for 2017 indicates that total borrowing will amount to JD5.2 billion, but the Treasury will use JD4.4 billion to repay previous debt. In that case, public debt will rise by only the budget deficit, estimated at JD827 million. An amount of JD355 million will also be added, it being the total deficit of part of the independent governmental units. The final amount of public borrowing during 2017 will be around JD1.2 billion, equal to 4.6 per cent of the gross debt. On the other side of the equation, the GDP in current prices will rise in 2017 at a higher rate, which may be around 5.7 per cent.