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How not to reduce current expenditure

Jun 11,2017 - Last updated at Jun 11,2017

Every Jordanian government undertook to reduce its current expenditure. Every economic columnist dealing with the budget has called for the reduction of current expenditure.

Both parliament and senate demanded a reduction in current expenditure. The Council for Economic Policies wanted the current expenditure reduced.

They all ignore the simple fact that current expenditure is the fuel needed to run the government and enable it to produce and provide the needed services.

It was customary for the parliament’s Financial Committee to order the government to shed 10 per cent of the current expenditure.

Parliament, no doubt, has the constitutional right and duty to reduce expenditure. But it has to pinpoint the specific items that should be reduced, instead of suggesting a percentage and leaving it to the Ministry of Finance to apportion the amount as it may see fit.

What is fit in the ministry’s view is figures as included in the budget document.

Let us first analyse the details of the current expenditure by going to the actual figures for 2016, to find that salaries make up 52 per cent of the current expenditure, pensions 17.5 per cent and interest payable on public debt 12.1 per cent.

Commodities and services such as stationery, electricity water, maintenance etc., form 6.5 per cent. They are all binding on the government and obviously cannot be subjected to reduction.

The remaining balance of 12 per cent of current expenditure goes to rents, consumption subsidies for bread, fodder, gas, electivity, water etc., which must all be paid.

How can the government reduce current expenditure?

Reduction of current expenditure was and will remain an attractive slogan but it is not for implementation.

What is possible and practical is to keep the annual growth of current expenditure at the lowest possible level.

Admittedly, at the end of the day, the deficit in the budget must be reduced because it is the main reason behind the rising debt.

If current expenditure is not flexible to allow any meaningful reduction, the only alternative is to increase domestic revenue, which unfortunately cannot be achieved except through hiking taxes and prices, two words that no official would like to utter.

Under pressure, the figures for the current expenditure in the budget are reduced in an artificial way.

The Ministry of Finance will find itself required to pay amounts in excess of the budgeted amounts and finds no alternative but to fail to pay on time.

Upon preparing the 2017 budget, it was revealed that there are amounts overdue for payment, committed to during previous years, to the amount of JD1,350 million which included sales and income tax refunds, unpaid electricity, hospitals and medicine companies bills, and amounts due to contractors and vendors.

This embarrassing situation came about because most officials are not ready to face the actual facts, bitter as they may be, and come up with solutions.

 

They buy time, hoping to push problems forward, to be dealt with by a future government.

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