Jordan’s Prime Minister AMMAN (Reuters) – Jordan’s Prime Minister Omar Razzaz said on Wednesday the draft budget approved on Wednesday was aimed at stimulating lukewarm economic growth to create jobs and reduce high unemployment.
Jordan’s Prime Minister
Razzaz told a group of university students that maintaining the country’s economic and financial stability rather than imposing any new taxes inspired by the IMF recommendations was the main driver of the draft budget approved by the cabinet. IMF-recommended taxes sparked protests in 2018, the largest in years.
“Our approach now is not to raise taxes but to achieve economic growth that will lead to jobs for young people,” Razzaz said of the budget, which will be submitted to parliament for approval and details announced on Thursday.
Economists and analysts say low growth and inadequate job creation are the main problems for the kingdom, although fiscal discipline aimed at containing a public debt of a record 94 percent of GDP should not be compromised.
Officials say privately that the 2020 budget deficit is expected to double to about 1.3 billion dinars ($ 1.8 billion) amid an expensive round of wage increases pledged by Razzaz next year to public sector employees.
Jordan is counting on direct cash support from major Western donors, which has traditionally covered its chronic budget deficit.
A close ally of the United States has suffered instability on its borders for years, due to wars in Iraq and Syria and conflict in the Israeli-occupied West Bank.
The new budget comes after the International Monetary Fund sealed a mission to Jordan last week that has expressed concern that revenue targets and public debt cuts may not be met under a three-year easing agreement that expired in June.
The IMF warned in a statement on Monday that public debt was still too high and said the challenge was to push growth above the average of two to 2.5 percent – a decade-long relationship – to reduce poverty and youth unemployment, which rose to 19 percent. The IMF said it had begun talks on a new three-year program that would give priority to growth and job creation.
Diplomatic sources say Jordanian officials have warned the IMF, in light of the protests in neighboring countries such as Lebanon and Iraq, over the past month over the erosion of living standards and corruption, that pushing the country towards further austerity could spark new civil unrest.
Growing resentment among Jordanians over austerity measures recommended by the IMF and tax increases has evolved into massive demonstrations in the summer of 2018 against corruption and mismanagement of public finances.
The specter of increased spending re-emerged when the government reached a costly wage agreement in October with the teachers’ union to end an unprecedented strike.
The government also increased military pensions, a move economists have described as yielding to populist demands at the expense of fiscal discipline.
Razaz acknowledged that wages account for 65 percent of budget spending, in a country whose government spending is among the highest in the world relative to the size of the economy.
Jordan’s public sector has expanded rapidly over the last two decades as successive governments have sought to appease citizens with government jobs in order to maintain stability.