AMMAN — Loans owed to banks by
individuals in Jordan have amassed to reach $16 billion, with over one million
borrowers. And over the past year, Jordanians in debt have had to endure
multiple increases in interest rates, pushing the possibility of repaying loans
even further out of reach.
اضافة اعلان
Data from the Central Bank of
Jordan shows that the number of individual borrowers has steadily increased by
a factor of 4.3 percent since 2017. This increase is in parallel with the rising
volume of loans.
This surge of individual indebtedness
in the Kingdom has caused many to wonder: What is the cause?
Economic policyPolitical economist Zayyan
Zawaneh told
Jordan News that the rising indebtedness of
Jordanians is due to the Kingdom’s financial policies and practices.
"The government itself
suffers from high public debt," he said. "This causes others to
suffer, especially in terms of government workers, as it does not pay them
their dues."
"Concerning defaulters
and people evading payments, years have gone by without any solutions."
A perpetual wait with no forward
progress has caused difficulties for both Jordanians and the Kingdom’s economic
sectors, he said. "These policies are making people suffer and putting
them in harm's way."
According to government statistics,
the number of individuals wanted on charges of defaulting on their
debts or loans has increased tenfold in just four years.
Currently, debtors constitute
about 16 percent of inmates in Jordanian prisons.
"The government itself suffers from high public debt. This causes others to suffer…”
The upshot of ‘successive
economic failures’
Economist Muhammad Al-Bashir
agrees with Zawaneh that policy is to blame.
Bashir told
Jordan
News that
Jordanians have suffered "successive economic failures
for several years".
Sales tax, he added, has
become "the main source of the Treasury's income".
Borrowing policies set by
Jordanian banks over the past years have produced about a million strugglers,
experts have said.
According to Bashir,
the government and the public suffer from growing indebtedness.
"An increase in
indebtedness and a simultaneous increase in bank profits has created a
paradox," he said, emphasizing that a
public financial crisis exists.
This crisis, he said, is
represented by tax-related legislation, non-tax-related legislation, and the
high unemployment rate.
"One of the reasons
behind the crisis is tampering with the Social Security Law in terms of early
retirement, which confuses the labor market," he added.
Interest ratesIn recent years, borrowers
have incurred additional fees and interest because they have postponed payments
due to the COVID-19 pandemic and the frequent interest rate hikes.
Economist Mazen Irsheid
told
Jordan News, "the accumulation and rise of loans,
despite the high global and local interest rates, make the
economic situation more perilous and complex than in previous years."
"During the pandemic period, interest rates were low. Now they have doubled over the past year… This puts Jordan in a sensitive spot."
"During the pandemic
period, interest rates were low. Now they have doubled over the past year, when
they were raised six times," he added.
"This puts Jordan in a
sensitive spot."
Data shows that Jordanians
borrow primarily to purchase houses and apartments, followed by
individual and car loans. The majority of borrowers are men, at around 81 percent. Meanwhile,
women make up 18 percent of borrowers.
Irsheid explained that rising
interest rates in Jordan have negative repercussions, especially since most
loans are for housing and real estate, which last "decades longer when
compared to personal loans", he said.
"When the interest is
variable, the borrower will be affected more, and the cost of
returning loans to banks will be higher," he added.
Despite this, Irsheid said
that Jordan would not face an economic crisis at present. "Even though
interest rates have gone up, they have not exceeded 4.5 percent, which is one
of the lowest percentages in the world.
The US dollarWhile an economic crisis is
unlikely, another increase in interest rates is not, especially during the
first half of the current year, said Irsheid.
"When the interest is variable, the borrower will be affected more, and the cost of returning loans to banks will be greater."
"This is due to the fact
that any interest rate hike in the US will cause a rise in Jordan," he
said.
In 1995, the International
Monetary Fund and King Hussein decided to peg the Jordanian dinar to the US
dollar.
"Consequently, this will
affect those who obtained
previous loans and new borrowers,” Irsheid noted,
stressing that most loans in Jordan are of variable interest.
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