(MENAFN- Alghad Newspaper)
Compared to income per capita in 2016, the average debt-to-income rate, per capita, according to the Central Bank of Jordan (CBJ) stands at 69.3 per cent. This means that nearly 70 per cent of the citizen's income, on average, goes to paying debts.
In other words, citizens are just as deep in debt as the government is, almost.
Around two thirds of the individual's income in Jordan is eroded by debt. Meaning Jordanians are left with only around a third of their incomes to cover life expenses; from food and shelter, to transportation, communication, and healthcare, notwithstanding other basic needs.
Meanwhile, the government's debt-to-GDP ratio stands at 93 per cent. Most of the debt is facilitated at high interests and premiums which drain a significant part of the state's income.
Every year, the Treasury pays out JOD1 billion to interests, whilst current expenses comprise 86 per cent of the government's total expenditure.
This isn't an easy figure to cut down!
In light of the average debt-to-income rate per capita, it isn't hard to figure out that people don't make enough to cover their needs.
Hence, they resort to debts and credit facilities; the banks, to cover the gap.
Moreover, the rate itself has become so high that they can no longer borrow more money. The erosion of incomes under such immense pressure is preventing households from covering their debts.
The few, more fortunate barely make do!
What does this mean; such a high debt rate? When did we get here?!
It means that Jordanian households are under massive pressures, as debt grows and more borrowing erodes more of their incomes.
Much of the credit facilitated is retail consumer loans, which are becoming more popular as people turn to consumerism.
Equally popular are real-estate loans; so many Jordanians have to get a loan to afford a house!
As for when did we get here; for years Jordanians have been finding ways to come with the failures to instigate economic progress, to increase household incomes.
Naturally, in the absence of justice in the distribution of wealth, what did we expect?
Household incomes, on average, have increased by JOD3.00 in three years.
On the opposite side of the equation, there is increasing inflation, aside to the rising trends of consumerism, all the while the economy has been in slowdown, and still is!
Make no mistake, such a debt rate is dangerous.
First, it reflects mostly on the individual's ability to secure a safe financial future, which places people under immense psychological pressures.
Second, it drives down credit and loan profitability for the retail section of the banking sector, which eventually increases the cost of capital.
Not to mention other ways in which the erosion of income reflects the macro-economy, and therefore the state.
Evidently, the governments, all of them, are responsible, both directly and indirectly, for the skyrocketing rates of indebtedness, for individuals as well as the treasury.
The expansion of expenditures over the last decade has led us all here.
It has been the main catalyst in our deterioration, followed by the delay in fundamental financial reforms, which should have addressed some of our most problematic issues; like tax evasion.
Financial reforms, had they been advanced in time, could have helped the treasury control and minimise frauds and manipulations in taxation, customs, and other income categories.
All this carries the capacity to expand public income, and still the government has not made a single, sound move to resolve these issues.
The point is; we are all in this together, citizens and government. We are all up to our chins in debt, and there is no easy way out of this hole.
It requires exceptional patience, and above all, a fundamental shift in spending patterns, be it government spending or individuals.
Individual consumerism and pointless governmental expenditure are not suitable for our income status.
More importantly, it is crucial to review the credit facilitation policy and strategy, to avoid further futile borrowing.
We are like our governments; we too have failed to wisely manage our financial affairs.
This article is an edited translation of the Arabic version, published by AlGhad.
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