The Jordanian government, faced with increasing difficulty to make ends meet, has launched a new strategy to offset the growing deficit, further exacerbated by higher oil prices, officials said on Tuesday, February 27. The thrust of the strategy is to tilt the balance of incoming aid in favor of grants at the expense of costly loans while also reducing expenditures to cover part of the deficit, said the head of the Aid Coordination Unit at the Planning Ministry, Maan Nsour.
In coordination with donor countries, the volume of grants rose to 55.5 percent of the overall development foreign aid received by Jordan in 2000, estimated at $663.3 million. Loans made up 44.5 percent, Nsour added. This strategy is designed to alleviate debt servicing burdens, set at nearly $800 million per year, he told the Jordan Times.
The United States, European Union, the World Bank and Arab funds topped the list of donor parties last year. The funds are poured into three main sectors; water, higher education and IT as well as health services. According to Ministry of Planning officials, the government has asked Washington for extra funds, similar to those sought by Egypt and Israel, to alleviate the regional economic recession from the ongoing Intifada.
In 2000, the treasury received US aid to the tune of $250 million, as part of a pledge to support cash-strapped Jordan for sealing a peace treaty with Israel in 1994. His Majesty King Abdullah is due to hold his first meeting with US President George Bush at the White House on April 10. Meanwhile, the government has managed to secure half of a JD100 million deficit, incurred in light of higher oil prices in 2001.
“We have cut JD56 million from the JD435 million capital expenditures in addition to already squeezing JD20 million from the current expenditures,” said government officials. Tightening current expenditures has already brought down the deficit from JD380 million to JD20 million. Under the IMF-controlled economic reform, which ends this year, the budget deficit should not exceed 6 percent without the calculation of foreign aid.
Cutting capital expenditures is bound to reflect negatively on the economic climate and employment as many public projects will be shelved for later years. A partial coverage left a gap of JD44 million has also yet to be collected. Expanding the sales tax base, while an unpopular measure, has collected an extra JD30 million for the budget this year.
The government, in seeking a mechanism to bridge the budgetary gap, has come to realization that customs duty and taxes should not be on the agenda. Official sources did not rule out the prospects of hiking fuel prices as an inevitable step to support the budget. Early this year, the government postponed plans to raise fuel prices amidst public dismay and parliamentary rejection.
The oil bill was set at $600 million in return for roughly 5 million tons of Iraqi crude. Half of the price came in the form of a presidential grant — making Iraq virtually the biggest donor state if calculated through planning ministry channels. — ( Jordan Times )
By Saad G. Hattar
© 2001 Mena Report (www.menareport.com)
