|Budget2002 : Oiling the economy's wheels
|Jordan's snowy days this week failed to cool discussions both in the government and among economists about the 2002 Fiscal Budget...|
Jordan's snowy days this week failed to cool discussions both in the government and among economists about the 2002 Fiscal Budget. Prime Minister Ali Abul Ragheb has already drawn the broadlines of the budget, reiterating a 6.5 percent deficit in the GDP. The latest predictions for this year's annual budget put the figure at around JD 2.3 billion. And the recently-approved JD 300 million plan for socio-economic transformation is being kept separate from any budgetary calculations.
However, the ins and outs of the budget remain unclear. The government will have to ponder its main objective of trying to balance the economy to achieve substantial growth. This is not forgetting its responsibility to fight unemployment and poverty. Speaking frankly, Minister of Finance Michel Marto openly said the government depends on foreign aid to achieve economic growth. About JD 250 million will be given to Jordan this year to reduce the budget deficit to around JD 200 million. Marto, however, is a bit cautious about the transformation plan for this year, saying it may face problems if no additional sources are secured.
He noted 90 percent of the funding for the transformation plan will come from the budget while the remaining 10 percent is expected from different sources, including the private sector.
Poverty and unemployment certainly bring misfortune to Jordanians, and the government is not immune. The 2002 budget will include allowances for the National Aid Fund to support the needy and increase their social development status. For the unemployed, the government recently ratified an JD 18 million plan to train more than 10,000 Jordanians to re-introduce them to the labor market. A fact which needs to be raised here is that any social development plan must aim to raise the per capita real income to more than $1500.
Early indications show the government will have to spend more money this year on its own investments, including that of the rehabilitation of its social development projects. A JD 200 million will go to the $600-million Disi water aquifer project. The long-awaited scheme is to start construction later this year in a joint venture with an international company and expected to become operational by 2006.
Observers agree the coming months will be critical for the economy, and the government's inputs and outputs this year will be the decisive criterion for the overall economic performance of the Kingdom. Sustainable social development and growth always require a balance in expenditure and sufficient proceeds to retain better economic performance.
About JD 60 million will go for social security, including health and educational programs. Rural and municipal adjustments are also on the agenda. The government appears to be determined to deal with rural areas and local debt in the Kingdom.
Public revenues are expected to improve this year to influence economic growth and rationalize domestic public expenditure. Economic reform, meanwhile, is also on the same track and expected to continue for the coming two years.
Apart from the slump in the global economy following the 11 September attacks on the US, Jordan's economy is fairing rather well. However, despite the relative political and economic stability, the Kingdom is open for business and awaiting more potential investors. The government will have to keep up its efforts in this regard to allocate more funding for promotional campaigns to achieve long-term outgrowth in the economy. Investments need to be targeted to the more vital economic sectors in the Kingdom such as tourism and commerce, which are unfortunately sensitive to regional and international developments. These sectors need to be revamped through efficient and open-minded cooperation between the public and private sectors.
Tourism is certainly a vital domain. It witnessed a severe setback in 2001 because of the political deterioration in the region and the downward trend in international travel in the aftermath of 11 September.
Tourism used to make up 12 percent of the GDP. The gradual increase in hotels and touristic sites in the Kingdom will have to be promoted more efficiently in world markets. It is hoped the government will maintain its support in that regard.
Next comes the financial sector. Calls were recently heard urging the government to cut interest rates to mobilize the Kingdom's business sector. Bank loans and consumer debt grew last year to more than JD 400 million and the Amman Stock Exchange witnessed a 40 percent increase in share prices over the past 12 months.
All told, economic growth is linked to business development. A significant development in any one sector will certainly affect the prosperity of others.