The forecasts contained within the government’s recently-unveiled 2016 budget bill fail to convince.
By Khalid W. Wazani
The government has yet again built a budget based on unrealistic assumptions. In 2016, the government expects a real growth rate of 3.7 percent, inflation rate of 3.1 percent, oil prices of $60 per barrel, and a 5 percent export growth rate.
The expected result of those assumptions is a budget deficit after grants of almost JD907 million at the central government level and JD520 million for quasi-governmental agencies. Before grants, however, these figures go up to JD1.7 billion and JD761 million, respectively. This means the total expected fiscal deficit of the country before grants is expected to reach almost JD2.5 billion in 2016. That’s almost half a billion less than the expectations of the 2015 budget, thanks mainly to the oil prices which made that achievement possible.
But if we go back to the main assumptions of the new budget, it’s hard to believe that a growth rate of 3.7 percent can bring about such a reduction in public deficit. The government, which built last year’s budget on a real growth rate of 4 percent, couldn’t convince anybody that a reduction in the growth rate of the economy will bring a better fiscal deficit.
At the same time, and against all the odds, the government is proposing an inflation rate of more than 3 percent while all international forecasts propose a negative, or close to zero, inflation level for 2016. And finally, I can’t at all understand how a real growth rate of 4 percent in the proposed budget of 2015 would result in a 3.8 percent increase in exports, while a lower growth rate for 2016 will trigger 5 percent growth in exports.
The only explanation I can think for all this is that budgeting has become a cut and paste way of doing business. To this end, the growth rate of domestic revenues, tax and non-tax local revenues is fixed at 8 percent for 2016, which is almost the same rate of 2015. There’s no logic in this assumption given that the proposed real growth rate for 2016 is less than that of 2015. Nevertheless, this raises a big question concerning the government’s seriousness about tax easing or giving more tax holidays for new businesses in order to revitalize the investment environment in the Kingdom. There’s a large rift between budget assumptions and its figures. Budget figures are conceived with little logic, which probably explains why we have never achieved any of our budget objectives over the last three years. Strangely enough, MPs never question the matter even though they’re required to do so under the 2011 amendments to the Constitution.
From another perspective, the budget planning process is still piling up public debt for the country. According to both budgets, the central government and its quasi-governmental entities, the 2016 total public borrowing will be JD7.9 billion, of which JD6.5 billion will be used to settle internal and external debt dues for 2016. This means that we’ll reach a point where almost 83 percent of the new debts are to settle creditors’ dues on the country.
Finally, if the real growth rate of the 2016 budget is built on much less than what the government proposed in the Jordan 2025 document, then we have to question the worth of this much-vaunted blueprint for Jordan’s economic future.