The Relationship between the Budget Deficit and the Local Public Debt in Egypt

Abstract

ABSTRACT

The study analyzed the reciprocal relationship between the budget deficit and the local public debt through a number of macroeconomic variables, which are the channels of transmission of the mutual impact over time between the two study variables from 1974 to 2018, using the Multi Regression Model and the characteristics of the rates of change across Quadratic Terms, and the Interaction Terms Interaction between the independent variables under study.

The study found a number of results, the most prominent of which is the impact of the decline of economic growth in the development of the domestic public debt through the channel of sovereign revenues in the public budget, and therefore the existence of a reciprocal relationship between public debt and the deficit of the public budget, and also showed the weak impact of inflation on public debt in the short term, In contrast to the high impact of the interest rate on the development of domestic public debt through the channel of public debt burden as an item of public expenditure. It turns out that the succession of governments coincides with an expansion in public spending.

Consequently, an increase in the public budget deficit, and consequently the public debt, explaining and the historical deficit, it witnessed the succession of many governments, especially after 2011, without punishment for the decline of the public debt, which contributed to the worsening of the debt; As a result of the increase in the total deficit in the public budget.