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Deficit and debt missed target

Jan 15,2017 - Last updated at Jan 15,2017

According to the economic reform programme agreed upon with the IMF, Jordan’s gross public debt was allowed to rise from JD24.9 billion by the end of 2015 to JD26.3 billion by the end of 2016, an increase of JD1.4 billion, or 5.6 per cent.

This percentage was supposed to be the same as the growth rate of the GDP accounted for in current prices, in which case, public debt would have stabilised during 2016 as a percentage of GDP, a major condition of the IMF programme.

Unfortunately, GDP in 2016 did not rise by more than 4 per cent, of which 2 per cent represented real economic growth, and 2 per cent the expected deflator.

Things being so, the objective will not be achieved this year unless the debt will be reduced from JD1.4 billion to JD1.1 billion, which is possible only if the budget deficit is reduced accordingly.

Financial figures issued by the Ministry of Finance as at the end of November indicated that gross debt had risen during the first 11 months of the year by JD1,370 million.

If this trend continued in December, the debt increase will hit JD1.5 billion. This is JD100 million more than the agreed ceiling.

Looking at the financial map, one can see that debt could have been brought under control as required by the programme if allowed to rise moderately in absolute figures, but stabilise as a percentage of a growing GDP.

This is the criterion embedded in the programme, which the Ministry of Finance tried hard but failed to abide by.

There is no certainly that debt in December has grown as it did in the first 11 months of last year. Some fresh loans were signed and it is not known if the government actually drew on those loans before the year end.

The proceeds of those loans should be used immediately to repay previous loans in an attempt to remain as close as possible to the agreed objective.

The Ministry of Finance undertook to keep the budget deficit within the agreed limit of JD918 million, but the deficit before grants exceeded JD1.2 billion by the end of November.

However, the deficit will be within target if accounted for after grants.

The Ministry of Finance tried to keep the gross debt by the end of last year within the limit of JD25.9 billion, but debt exceeded JD26 billion one month before the end of the year.

An observer can reach the conclusion that the fiscal performance in 2016 was below the level specified by the programme.

Only a miracle that took place in December could change this outcome. Unfortunately, we do not live in the age of miracles.

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