Abstract
This study aims to identify the role of the main components of the public budget for influencing public debt in Jordan through an econometric study. In particular, the EViews 9 program is applied to the annual time series of public debt, current expenditures, capitalism expenditures, taxes, and external grants from 1990 to 2018. Results are related to the data that served as basis of this study and was issued by the Central Bank of Jordan. This study concludes a set of results, including the presence of a positive and moral effect of capital spending on public debt and the presence of a negative and moral effect of taxes on public debt in short and long terms. Results show a positive and significant effect of the current spending on public debt in the short term and a positive, nonsignificant effect in the long term. In addition, a negative, non-significant influence of external grants on public debt in the short term and a negative moral effect in the long term are found. A set of recommendations is presented. First, mechanisms to reduce waste in public budget should be activated, particularly in the area of current expenditures, through addressing administrative sagging in the public sector. Thus, employment is linked to the level of future productivity. Second, corruption and nepotism should be fought against. Third, transparency should be imposed in state departments.Keywords: capital expenditures, current expenditures, external grants, general budget, public debt, taxes.JEL Classifications: H6, H63, H72DOI: https://doi.org/10.32479/ijefi.9717
Highlights
Many countries at various levels of their economy, whether developed or developing, seek to borrow in internal and external terms given that the advanced state fail to discourage borrowing
This study focuses on the effect of the main public budget components, namely, current expenditures, capital expenditures, taxes, and external grants on the Jordanian public debt and designs a standard economic model
Current expenditures contribute to controlling investment expenditures in public expenditures, given that the ratio of current expenditures to public expenditures reached approximately (81%) on average during the study period. - The tax revenue contribution dominates public revenues at an approximately 60.5% average rate during the study period. - The growth of external grants is volatile due to its influence on the nature of the prevailing economic and political conditions in donor countries during 1990-2018. - The high ratio of public debt to gross domestic product (GDP) accounts for approximately 106% on average during the study period
Summary
Many countries at various levels of their economy, whether developed or developing, seek to borrow in internal and external terms given that the advanced state fail to discourage borrowing. The increase in public debt, as a percentage of GDP, from a reasonable limit would certainly expose the economies of countries to a set of unsustainable negative effects. A set of internal and external factors govern the volume of borrowing in any country These factors include but are not limited to the economic and political conditions surrounding the country, the level of the economic growth of the country, the amount of revenues and public expenditures of the state, the current account deficit, and the decline in foreign currency reserves and transfers of workers abroad. To what extent can the main components of the public budget affect the public debt of the state of Jordan?
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