Borrowing Smart

Borrowing can help an economy grow. But Jordan is taking on debt for all the wrong reasons.

By Yusuf Mansur

“Neither a borrow nor a lender be,” Polonius advised his son in Shakespeare’s Hamlet. But unlike the royal counselor, economists aren’t outright opposed to debt. They consider debt—or rather rational debt—to be a good thing. It’s crucial to economic growth as it allows both the individual and the state to make investments they couldn’t otherwise afford. But debt can also be bad, as has been the case with Jordan’s borrowing of late.

Countries that borrow must never forget that debt has to be repaid with interest. So if a country wants to increase the burden of debt on its population, it should borrow to finance things that benefit the productivity of its resources and enable the nation and its government to create more revenue that will, at the very least, cover the debt and its cost.

This attitude to borrowing doesn’t exist in Jordan. Rather, one government cabinet after another has used debt not to encourage growth, but to pay the burgeoning salaries and pensions of its employees. They also aren’t accountable to its accumulation, preferring a successor to bear the burden and flack, which in turn dilapidates the resources of the nation and its future generations.

Most importantly, in the shifting of the debt burden from one generation to another, a practice that the incumbent ministerial cabinet hasn’t been shy to do, the government is taxing not only the prosperity of this generation, but also the coming ones. One is reminded of the sound advice from Thomas Jefferson almost two hundred years ago: “It is incumbent on every generation to pay its own debts as it goes.”

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Sadly, the ministerial cabinet has been amassing debt at a fast rate, even faster than its predecessor, especially since it has been the recipient of the greatest amount of aid ever. Of course, the lame excuse that the Egyptian gas stoppage has caused the debt has been overused. Missing in the government excuses is its failure to motivate greater economic growth as it continues to increase energy prices and borrowing thus making it impossible for businesses to survive, never mind expand.

But how is the government going to pay back the debt? It’s silent about that and probably never considered it an issue. What matters during its term is paying salaries and pensions. Then, and after it’s not so early departure, its members, now ex-ministers, will commence to shoot at their successors and become the true reformists. Suddenly the shroud of ignorance is gone and knowledge starts to ooze from them as they theorize, criticize, and collect one of the most generous pensions in the world, especially for a debt-ridden economy.