Internal and external public debts taken together amount to over 100 percent of the gross domestic product of the country. Debt management is therefore an important, even crucial, component of Jordan's economic policy. The draft budget for fiscal year 2001 defined the elements of this management, and the way the treasury will handle this challenge.
According to the draft budget, as presented by the minister of finance to the Parliament, the public debt service in the form of instalments and interest in fiscal year 2001 is estimated to reach JD521 million, which is equal to 22.7 percent of the budget or 8.3 percent of GDP. This is obviously a heavy burden, calling for certain measures to enable the government to cope with this problem and honor its commitments to creditors on time without having to suffocate the economy or put more pressure on a population already hard pressed.
The measures which the budget adopted call for rescheduling of instruments and interest, to the extent of JD159.2 million, and to borrowing JD380.8 million (JD1=$1.41), thus leaving an extra amount of JD19 million to be used to support the financing of some development projects planned to be implemented during the year.
This is the general picture in its entirety. To analyze the figures and break them down to their components, we find that Jordan's external debt will rise, by the end of 2001, by JD114.7 million, or some $162 million, while internal public debt will rise by JD182.5 million.
The minister of finance assured the Parliament that the external debt ratio, calculated as a percentage of GDP, will drop substantially during 2001, despite its rise in absolute figures. Should this happen, it would be the result of two factors: first, the buy-back operations in the secondary market using part of the privatization proceeds deposited in a special account at the Central Bank and, second, the assumption that the GDP itself will grow in 2001 by 6 percent in current prices, of which 2 percent represent inflation, and 4 percent represent growth in real terms.
In other words, the treasury will finance all instalments and interest falling due in 2001 by drawing on fresh loans and rescheduling arrangement which will yield a net surplus of JD19 million, as mentioned above, to be used to finance public expenditure.
That being so, indebtedness and its servicing will form neither a heavy nor a light burden on the budget during 2001. The debts will simply be either rolled over, or repaid by drawing on new loans, many of which come mainly from the World Bank, the International Monetary Fund (IMF) and Arab funds.
The positive side of this liberal fiscal policy is that the government gives priority to economic growth and motivating the private sector, and not to excessive pressure on the already low standard of living, to secure surpluses to service debt. This policy is understandable in the current economic slow-down and the endeavor to break the deadlock and embark on a new phase of rapid growth.
In this respect, the stamp of approval of the IMF, and the rubber stamp of the Parliament, could be classified as politics rather than pure economics. ¯ (Jordan Times)
By Fahed Fanek
© 2000 Mena Report (www.menareport.com)
