Tough reform decisions ahead | Jordan Press | Ammon News

Tough reform decisions ahead

[1/7/2013 12:00:00 AM]

by Fahed Fanek/ The Jordan Times

It is meaningless to purposely underestimate the risk of the high fiscal deficit in 2012 simply because it turned out to be less than the estimation made by the International Monetary Fund.

According to the minister of finance, the central budget deficit for 2012 is re-estimated at JD1,651 million, to be added to the losses of the National Electric Power Company (NEPCO), estimated at JD1,197 million, covered by banking loans guaranteed by the Treasury.

The total deficit of the public sector would thus be JD2,848 million, or 18 per cent of the gross domestic product. This is obviously a very high and unacceptable rate, taking into account that the safe percentage of budget deficit in normal circumstances should not exceed 3 per cent of the GDP.

Countries are to be considered in a state of fiscal crisis, and in need of a strict economic and financial stabilisation programme, when budget deficit reaches 6 per cent of the GDP. Yet, consecutive Jordanian governments tolerated a deficit at double or triple that rate before knocking at the doors of the IMF for help.

The official budget document that the Ministry of Finance announces at the beginning of each year by no means reflects the true and full state of affairs in the public sector.

The budget of around 63 governmental units with independent budgets must be added to the central budget, especially the losses sustained by the government-owned NEPCO, and all the incurred but not paid amounts due to contractors, vendors and others.

Official figures do not take into consideration the short-term debt, which is more risky and sensitive than long-term debt.

The government adopted a draft budget for 2013. The planned deficit in 2013 is JD1,310 million, lower than the deficit of the previous year. The NEPCO losses are not known, but even if such losses are slashed in half, the total public sector deficit will reach JD2.2 billion, or more than 9.1 per cent of the GDP. This is a very high rate by all measures.

The above is the size of possible deficit under the best of probabilities. It may be even higher if decisions to raise the prices of water and electricity are delayed.

In that case, the deficit may approach JD2.4 billion in 2013. Public debt may rise by the end of 2013 to the level of 80 per cent of the GDP.

From a fiscal point of view, it is almost sure that 2013 will be better than the previous year, but it still remains a difficult year, calling for more efforts to put things right and bring the Jordanian economy back on the right track.

The economic and financial reforms need a tough minister of finance and a prime minister that cannot be stopped by hindrances in his way, who enjoys and deserves the support of all responsible circles that care for the real national interests more than their popularity.

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