Jordan’s 2010 budget will focus on curbing the country’s soaring deficit, the kingdom’s finance minister has said.
Bassem Al-Salem said the aid dependent country’s 2010 budget worth 5.4 billion dinars ($7.6 billion), to be approved by the government this week, sought to put a brake on years of free-wheeling government spending and spur growth.
“The budget’s focus is on state expenditure that has become very large and we need to tackle this before the problem accentuates. This will avert the dangers facing the economy in the medium term if state spending is not reined in,” Al-Salem told Reuters in an interview.
The 2010 budget targeted lowering the budget deficit to 685 million dinars ($966 million) or 3.9 percent of GDP from a forecast 1.176 billion dinars ($1.6 billion) or 7.3 percent of gross domestic product (GDP) this year.
Jordan’s public finances are under strain as the global economic downturn hurts domestic demand and foreign cash flows, including remittances from expatriates in the Gulf states.
Al-Salem said the new budget sought to reform public finances to ease the country’s high debt burden, dependence on grants, and vulnerability to higher oil prices that threaten to derail the robust economic growth seen in recent years.
“It is not acceptable to continue to plan our financial stability based on aid and grants,” Al-Salem said.
He said the economy’s sound fundamentals after implementing free market reforms would allow it to absorb this year’s exceptionally large deficit as it restores fiscal prudence for a sustained recovery in 2011 and 2012.
“We have the fiscal space for a high deficit this year and that it’s under control. But the fiscal discipline in this year’s 2010 budget will give a breathing space,” Salem said.
The last few years saw government expenditure jump by almost 50 percent to a projected 5.76 billion dinars in 2009 against 3.91 billion dinars in 2006, Al-Salem said.
The 2009 budget was thrown into disarray as local revenues plummeted with sluggish domestic consumption and foreign aid and grants falling sharply to an estimated 44 percent to 405 million dinars by year-end against 718 million dinars in 2008.