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French Version

2003 budget reflects government nervousness about war on Iraq

Fears of Finance Minister Michel Marto on the repercussions of a possible war on Iraq are creating much concern among Jordanians and businessmen alike.

These fears were visible last week when Marto noted the 2003 budget—at JD 2.4 billion—was beefed up to take into account the fact that war would be very likely. Marto said war will cost Jordan some $1.5 billion.

“It is certainly an emergent budget,” Marto stressed last week. “It is compatible and will help the government to deal with all of the possible hazards that may arise and affect the economy.”

Budget figures are resonating government fears. The budget has a deficit of JD 316 million, but this is expected to decline by 32 percent to JD 216, because of the expected government revenues this year from its privatization program.

Public expenditure is estimated at more than JD 2.44 billion, an increase of 6.6 percent over last year. This is due to mounting wages. The budget will also bear further JD 475 million outlay under the socio-economic transformation plan.

This plan is at a crossroads waiting for a JD 300 million in aid and grants to meet its objectives.

Observers suggest the hesitation in declaring the budget only until last week has to do with the fact that the government is jittery about the state of the economy particularly if a war does take place. They note the economy is already facing detrimental effects because of the current political deterioration in the Occupied Palestinian Territories.

Dr Mohammed Saqr, professor of economics at the University of Jordan, said the budget doesn’t give much detail about what will the government do if the war takes place.

“There is one thing Jordanians are sure about: Rising expenditures, and the fact that this will come from people’s pockets,” Saqr told The Star. When war takes off, Saqr points out none of Iraq’s neighboring Arab countries will be able to survive its effects.

Iraq supplies Jordan with some 6 million tons of oil annually, about half of which is free while the rest on preferential price at $19 per barrel. Saqr noted the cost of one barrel of oil is estimated at $9, since half of the $600 million oil supplies are free.

“The government is overrating the price of oil it supplies to Jordanians, bearing in mind the actual price of each barrel is less than half of the world’s level,” he explained. This year’s budget promises Jordanians with more taxes and less effectual development, he said.

“The economic and social transformation plan should be more effective in that regard,” Saqr said. “The government talks about development but we didn’t see anything yet. It can achieve growth in economy but it would be at the expanse of people’s freedoms and livelihoods.”

Other economists, meanwhile, said the government wants first to diminish the ramifications of war. Ibrahim Seif from the Strategic Studies Center at the University of Jordan, said this year’s budget shows the government has the ability to deal with the situation if war gets longer.

He, however, agrees with Saqr that the government will not achieve a five percent growth in the economy this year. Seif noted the budget has three dimensions: Public revenue, forthcoming economic projects and the social development plan. He said the budget pays much attention to the potential economic projects, including the Disi water project and the gas pipeline with Egypt.

“These two projects are essential and the government can complete them easily,” he said. As for the oil pipeline between Jordan and Iraq which was included in this year’s budget, Seif said the government must tackle the topic seriously and start building soon.

A recent study by the Arab Information Center in Cairo indicated Jordan is expected to bear some $900 million in losses if war happens. Most of the losses are going to be registered at the transport sector as a cut in oil supplies from Iraq will surely affect the flow of business and trade in the Kingdom. The study also warned unemployment and poverty rates in Jordan will double to over 20 percent.

“It should be clear public expenditure will not counteract the effects of war on the low-income. And the government’s social development projects will be hindered in the war,” he explained.

“Only the wealthy and rich people will get wealthier and the poor will get poorer. It is the same formula for the past three years.”

The 2003 budget sustains its subsidization of basic foodstuffs at JD 25 million excluding oil of course.

Marto pointed out if war happens then the government will re-price oil according to market forces which means they will rise steeply. This is because rising oil prices in world markets will definitely affect the economic and social development in the Kingdom. It is despite Marto’s assertions inflation this year stands at around three percent.

The World Bank recommended recently the government shows more development in the basic services sector, notably education and health in the Kingdom. Sectors like agriculture and tourism are already in sluggish state.

The World Bank said the Kingdom has achieved good strides in the development of human sources over the past years, and this can be sustained only through better qualification in demographic growth rates and equal wealth distributions.

The bank formed earlier this year a thorough strategy to support Jordan’s economy with $305 million in loans. The strategy aims at enhancing consultations with the government, civil societies and the private sector to come up with a clear development strategy for the next three years.

The $305 million loans are part of contingency plans the World Bank is discussing to support the economy. It could actually raise the amount of loans to around $380 million. The government has already initiated talks with the bank’s officials about these loans, hoping to be employed in the development of tourism, education and local municipalities. “The quality of life is what concerns Jordanians. If this can’t be achieved in peace, it won’t certainly happen during wartime,” Saqr stressed.

Amman,19February2003
Ghassan Joha
The Star


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