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Jordan targets a 33 per cent reduction in its 2013 budget deficit.

Jordan is seeking to rein in its budget deficit by as much as a third in 2013, in an attempt to offset the damaging effect of rampant fuel

import costs and a surge in social welfare spending, precipitated by a series of popular uprisings in surrounding Arab


Sources at Jordan's finance ministry sources said that this year's draft budget, was deliberately compiled to reduce the deficit to 5.4 per

cent of gross domestic product (GDP) from a 7.9 per cent high reached in 2012.

In a move made public back in November, which incited widespread social disorder, the Jordanian government took a decision to curtail

fuel subsidies. Protests flared into violence in poor rural areas, with riots lasting several days, during which government buildings were set

on fire and numerous branches of banks looted.

However, the International Monetary Fund (IMF) expressed its absolute support for the cessation of fuel subsidies, last month. The measure

is part and parcel of a fiscal consolidation plan which targets cutbacks in the Hashemite Kingdom's budget deficit and is thought to be

among the prerequisites of securing an IMF standby loan of US$2 billion.

According to finance ministry sources, the draft 2013 budget has been fixed at 7.45 billion Jordanian Dinars (US$10.5 billion) with an

emphasis on fiscal thrift as the modus operandi through which the deficit will be pegged back to 1.31 billion Jordanian Dinars

(US$ 1.85 billion) from the 1.76 billion (US$ 2.48 billion) figure predicted for 2012.

Nevertheless, this latest 2013 budget estimate, does take into account 850 million Jordanian Dinars (US$ 1.2 billion) in grants from donor

countries, on which the country has been historically dependent to bridge certain of its budget shortfalls. Foreign cash flows in terms of

tourism and remittances from Jordanians working in Arabian Gulf states have been hit by Arab uprisings in the region. There are also now

some 200 to 300,000 Syrian refugees sheltering in Jordan, putting the healthcare system and other community services under severe

financial pressure.

The greatest economic setback of all came as a result of an abrupt halt in low-cost gas imports from Egypt, due to repeated pipeline

sabotage during the revolution, which pushed Jordan into an urgent switch to significantly more expensive fuel oil to drive its electricity

generating plants.

Another hurdle which Jordan faces is the running costs of a massively inflated public sector, that encompasses the military and security

services, in the view of many economists this represents an unsustainable expense in the medium to long term. Ministry sources say that

the 2013 budget allocates 6.21 billion Jordanian Dinars (US$ 8.75 billion) to current state expenditure, which is predominantly swallowed

up by public sector wages; they add that 1.24 billion Jordanian Dinars (US$ 1.75 billion) is earmarked for capital


Economic growth in 2013 is expected to reside in the region of 3 per cent, similar to that of 2012, with the government opining that fiscal

reform is crucial to meeting the IMF's ground rules for ongoing financial assistance.

Copyright Andy McTiernan. All rights reserved.

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Publication:Andy McTiernan Property & Economy Bulletin
Date:Jan 13, 2013
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