Published: 2018-12-17 11:33
Last Updated: 2018-12-17 11:54
MP Tarek Khoury said that the government is benefiting from the increase of local deposits in banks to finance the budget deficit, on Monday, December 17, 2018.
He pointed out that the central bank aims to raise the interest rate in order to control the rate of inflation, adding that the rise of deposits instead of investment means decline in the market.
Khoury warned that "the increase in deposits leads to a lack of consumption, which ultimately affects the economy negatively," pointing out that raising the interest rate has led to cash flow withdrawal in favor to the banks who want to collect the interest benefit.
MP Khoury added that raising the interest rate has turned investors away from borrowing from banks because of the high interest rate, and this leads to the cessation of investments that negatively affects economic growth.
Khoury explained when interest rates are cut, more people borrow more money, and the result is that consumers have more cashflow to spend, which causes the economy to grow and inflation to increase. Vice versa, with higher interest rates, people tend to save more, and with disposable incomes reduced due to an increase in interest rates, the economy slows and inflation falls, reflecting the decline in the purchasing power of the currency.
"All the economies in the world are calling on people to invest their money in production rather than in deposits in order to increase production and raise the value of the currency. But in Jordan, the opposite happens, where the central bank raises interest to withdraw liquidity from the market instead of investing in projects," Khoury said. The accumulation of wealth in banks is a negative indicator to the world of investment, and the government should not boast about it.