This paper would seek to provide an economic understanding –as to the reasons regarding the trends about the government expenditure. The paper would provide a trend analysis of the way Arab governments have spend their funds in order to provide goods and services and as to why the trends have been the way they have been. Government spending is classified as government purchases for current consumption classified as government consumption, those purchases which are for the purposes of future production and lastly, the mere transfer of payments referred to as transfer payments. This spending can be financed by a number of ways including borrowing, taxes etc.
The following graphs will relate the government expenditure to the time period over which those expenditures were carried out-The following table highlights the years and the two countries whose trends are displayed by the following graph.
The governments of both the countries are increasing their spending over the ten year time period but the rate at which the government spending of Tunisia is rising is much greater. This shows that the level of development that Tunisia is undergoing is much more rapid than that in Jordan. This can be seen by the new government policy of the current government which is investing in many development projects and there is a rampant spending taking place. As a result of this infusion of government funding, the poverty rate has gone down substantially depicting the positive relationship between government funding and poverty.
The steady rate of the government spending in Jordan indicates that Jordan’s economy is moving towards a steady growth rate as the government spending is more inclined towards maintain the current consumption rather than increasing the level of output. Government expenditure is one of the factors which increases the aggregate demanded subsequently the output of goods and services. In this case, the economy is retaining a balanced position rather than undergoing expansion.
The above diagram shows the relationship between government expenditure and years. Algeria is an economy which is on the road to recovery and has been strengthened by its tighter fiscal policy and recent increase in oil prices. As result of the increase of the oil prices, Algeria has been able to make effective use of the higher export revenue to reinvest in the economy to strengthen it. There has been a pattern of decline during the period of 200 to 2003 and then rise as a result of the recovery process. Sudan is a country which is undergoing a civil war and its government is facing a sever crisis of low per capital output. The recent surge in oil prices and improvements in the monetary policy have resulted in a stabilized policy.
Syria and Lebanon both show a similar trend. The Syrian economy is based on tourism, Oil, agriculture but as the trend of low government expenditure indicates-the level of public sector performance is pretty low as a result of oil deficit, corruption and a mismanaged economy. Lebanon’s economy is well known for its commercial networking around the world but as a result of its law of raw material produce and its complete dependence on the Arab countries for oil, its economy has not done well. The recent Lebanese war in 2006, has resulted in a major hit to the economy and hence, the level of government expenditures have been low due to low tax revenue.
The above table and graph indicate that except for Egypt, somewhat Libya the rest of the oil producing nations are not doing so well for themselves. The level of government expenditure in Libya is high due to the high level of oil export earnings and the recent investment by the government in the commercial sector in order to decrease the dependence on the oil export earnings. It is undergoing a business boom and the level of companies being privatized are also rising showing that the level of tax revenue earnings re also rising. Yemen and Mauritania both are suffering from severe economic issues and the government’s deficits are greater than their earnings hence, the low level of spending.
Table 1. Column 4. The relationship between government expenditure and years
The low level of government spending except in Emirates shows that these Arab countries are experiencing severe economic crises which has resulted in low tax revenues and hence, the low level of government spending by these governments.