Jordan’s 2001 fiscal budget received the approval of the upper house of parliament on 29 January after the lower house approved the draft bill on 19 January. The JD2.3bn ($3.2bn) budget contains a 14.14% increase in expenditure over the previous year and a budget deficit excluding grants of JD400mn ($557.1mn) – a figure representing less than 6% of gross domestic product (GDP). The bulk of the budget increase will be devoted to capital investments.

Jordanian Budgets: 1999-2001

JD Thousands

Local revenue, set to increase by 16.09% to JD1.83bn ($2.5bn), is derived largely from an expected 13.76% increase to JD521mn ($725mn) in general sales tax revenue after January’s implementation of a value-added tax (VAT) and from a 20.59% increase in taxes on income and duties to JD205mn ($285.5mn). Total tax revenue is estimated at JD1.06bn ($1.48bn), an increase of 9.74% over the previous year. According to 'Amman-based Atlas Investment Group (AIG), a comparative analysis of fiscal performance shows that revenue figures in the 1999 and 2000 budgets have not been realized, as actual figures fell short of goals by 8% and 12% respectively.

Jordan relies heavily on grants and loans as a key component of its revenues, with grants of JD237mn ($330mn) comprising 12.9% of total revenue in the 2001 budget. With grants excluded, Minister of Finance Michel Marto expects the deficit to reach 6% of GDP in 2001, down from a revised estimate of 6.8% for 2000. It is still unclear, however, whether the actual 2000 deficit will be under 7%, as figures for the period January-October 2000 show the deficit expanding by 40% compared to the same period in 1999, according to AIG. The government had considered increasing the price of gasoline and other products to keep the budget deficit within 6% of total GDP – a major condition for securing loans from the International Monetary Fund and for debt rescheduling (MEES, 25 December 2000/1 January 2001). The decision, however, was postponed after Prime Minister 'Ali Abu al-Raghib announced on 14 January that the increase was not needed to finance the rise in investment expenditure. Speaking on television, he also said a rise might take place later, but only after a comprehensive study was undertaken to determine how such an increase would affect the living standards of low income Jordanians (MEES, 22 January). On 13 December the government announced plans to increase the price of gasoline and other products by 25-30% to meet the $2/B increase in the price of imported Iraqi oil, which is expected to raise the cost of oil by as much as JD180mn ($250.7mn) this year (MEES, 25 December 2000/1 January). But Jordan still receives all its oil needs from Iraq at approximately half the rate of international oil prices.

Current expenditure outlays generally rose across the board with expected, but minor, increases in military and civil administration spending. More importantly, the government also anticipates an 8.16% reduction in interest payments on foreign debt to JD225mn ($313.4mn) in 2001. The decrease in loan payments reflects a 4.2% decline in foreign debt to $6.9bn in the first half of 2000 from $7.2bn at the end of 1999 (MEES, 21 August 2000). Despite the drop, due primarily to a restructuring and rescheduling of the country’s debt to France and the UK, foreign debt still stands at more than 95% of Jordan’s gross domestic product. The government plans to increase investment expenditure in 2001 by 50.16% – a level that appears overly ambitious.

During the budget debate, the prime minister said in response to remarks by senators that Jordan recognized the challenges it faces and believes that it should benefit from technology and economic interaction with the developed world. He also said that the government intended to continue with the privatization process and its war against corruption and problems that have hampered administrative reforms.

© Copyright MEES 2004.