Public Debt to Increase in 2018 As Gov’t Expands Spending: JSF

AMMAN —AlGhad— The Jordan Strategy Forum (JSF) issued its Annual Budget Analysis Report a few days back, on the 2018 General Budget Bill, highlighting shifts in current economic and fiscal policies, meanwhile underlining the increase in public debt.

The Report states that building the real economy remains Jordan’s most difficult economic challenge.

In light of the 2018 Budget Bill, the current public deficit after grants and aid is expect to shrink to JOD543 million, comprising 1.8 per cent of the Kingdom’s GDP.

Current deficit before aid and grants is estimated at JOD752 million, which comprises approximately 2.6 per cent of the GDP.

Deficit before aid by the end of 2018, according to the Budget Bill, is estimated at JOD1.243 billion, approximately 4.1 per cent of the nominal GDP. Deficit before aid after reassessment, however, is estimated at JOD1.587 billion, comprising around 5.5 per cent of the Country’s nominal GDP.

In the meantime, the government plans to further expand public expenditures by nearly 7.4 per cent in 2018, to JOD9.093 billion, according to the Report. Just about JOD7.886 billion of it will go to current expenses, as the remaining JOD1.152 billion go to capital expenses.

The estimated expansion rate for expenditures in 2018 is relatively higher than the actual expansion rate in 2017.

Obviously, this indicates not only that the government’s expenses and liabilities are growing, but that they are also growing at an increasing rate.

This year, the Treasury’s expenses account grew by some JOD518 million, approximately 6.5 per cent, from 2016’s total expenses account.

Since 2010, the government has not been able to reduce the current expenditure-to-GDP rate below 25 per cent, as is also listed in the 2018 Budget.

The growth in next year’s current expenses account, is primarily due to the increase in allocations to commodities and services as well as interest and premiums payable.

Liabilities payable in premiums and interest on foreign debt have grown from JOD245 million in 2017 to JOD343 million in 2018, by approximately 40 per cent.

Meanwhile, the costs of services and commodities are also estimated to grow by some JOD197.3 million, or 56.1 per cent, from 2017’s.

Combined, the two significantly add to the current expenses and liabilities account.

However, the Bill indicates the government has decided to cut subsidies and redirect them in part to increase premium and debt interest payments, which is good, according to the Report.

As for the capital expenditures, it is noteworthy to underline that the allocations are distributed over 939 projects, including underway and new projects across Jordan.

In terms of public income, domestic revenues are estimated to increase by is JOD915.7 million, or 13.3 per cent, in 2018, on the one hand.

On the other, foreign grants and aid is also expected to decline by approximately 16.2 per cent, some JOD135 million, in 2018, compared to actual grants cited in 2017.

In the years 2010 through 2017, the tax-income-to-GDP rate did not exceed 15 per cent. In light of the 2018 Budget Bill, it is not expected to next year either.

Contrary to what the public wants to hear, the Forum has confirms that this rate remains lower than the global average.

Moreover, sales taxes make up 71.7 per cent of the 2018 Budget Bill’s total domestic tax revenues, compared to the actual 69 per cent in 2017.

The ratio of corporate income tax revenue to the overall revenue from taxation activities is expected to decline to 1.6 per cent in 2018 Budget, after the government managed to raise it from 1.9 per cent in 2010 to 2.8 per cent in 2016.

Notably, compared to countries around the world, taxation on sales activity in Jordan is considered among the highest worldwide.

Sales tax in Turkey stands at 43.6 per cent, compared to 31.8 per cent in Poland and 24.5 per cent in France.

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© جميع حقوق النشر محفوظة لجريدة الغد 2018