The lead paper (Pettifor, 2019) discusses an important issue at the
macroeconomic level, especially the impact of financing government’s expansionary
budget deficit through borrowing. The paper reiterates that claiming that the use of
loans to finance the deficit will lead to a decline in the economic activity and will in
turn increase the deficit, is a common misconception. In fact, the data on the British
economy over a period of a hundred years, as shown in the lead paper, proves that
there is a positive relationship between the volume of the budget deficit (and public
debt) and economic activity. This, in turn, lead to a decrease in unemployment and
thus, eventually contributed to a reduction in the budget deficit. These results have
been proven by other researches as well as I have mentioned in this paper. I have also
pointed to other researches which indicate that there is a negative relationship between
the size of the debt (or the budget deficit), and economic activity, which contradicts the
hypothesis of the lead paper. In this brief comment on the lead paper, I also discuss the
fact that the global debt phenomenon has become a burning issue. I present a summary
of the state of international debt around the world and discuss its impact on the
economies of many countries that repay their debts in hard currencies. I argue that this
situation must be taken into consideration when discussing the impact of borrowing to
finance the government budget deficit to stimulate economic growth. I also propose
that these effects on the borrowing economies should also be analyzed in the event that
these international loans are in the form of Islamic instruments (ṣukūk) which are
increasingly being used by some governments as a tool to finance their budget deficits,
especially among the OIC countries. However, because it is a modern financing tool,
several years need to pass before we can viably test the relationship between them and
economic growth and the extent of their impact on key variables at the macro level of
the economy.