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Waqf financing expenditure and its impact on government debt

Azrai Azaimi Ambrose, Azniza Hartini and Aslam, Mohamed and Hanafi, Hanira (2019) Waqf financing expenditure and its impact on government debt. European Journal of Islamic Finance, 13. pp. 1-15. ISSN 2421-2172

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The Malaysian debt has been under scrutiny since the 1Malaysia Development Berhad (1MDB) scandal; placing pressure on the research for sustainable debt. The purpose of this article is to forecast the impact of waqf (Islamic pious foundation) financing expenditure on federal government debt in Malaysia. It is to ascertain whether waqf can be an alternative solution to government debt reduction. To perform this, the Neoclassical Dynamic Stochastic General Equilibrium (DSGE) model is adopted. The theoretical framework is developed by considering the history, tradition, culture, and political influence of waqf primarily in Muslim majority countries. It was also inspired by the European third sector framework. The result shows that federal government debt can be reduced when waqf finances federal government expenditure. This has several implications. For one, this study revives the cohesive government-waqf role in providing pure and mixed public goods without depending solely on government expenditure. It highlights the fact that these shared role has an impact of reducing government debt. The result also inadvertently provides evidence of a significant third sector role on public finance dynamics. As a matter of fact, this study is one of very few quantitative attempts in illustrating how waqf interacts with the economy and its impact on government debt.

Item Type: Article (Journal)
Additional Information: 8710/74610
Uncontrolled Keywords: Waqf, Islamic Economics, public finance
Subjects: H Social Sciences > HA Statistics > HA154 Statistical data
H Social Sciences > HJ Public Finance > HJ1438 Public Finance In Islam
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button): Kulliyyah of Economics and Management Sciences
Depositing User: Dr. Azniza Hartini Azrai Azaimi Ambrose
Date Deposited: 07 Oct 2019 12:16
Last Modified: 10 Jan 2020 01:57
URI: http://irep.iium.edu.my/id/eprint/74610

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