With its 2017 budget, the government has a golden opportunity to break with the past and present us with a more studied and transparent roadmap for our immediate economic future.
The government is no doubt busy preparing its budget for next year. While I’m sure they have their own team of seasoned experts on the case, I would still like to make a few suggestions concerning this important economic forecast.
First and foremost, the budget shouldn’t just be a cut and paste version of the previous one. Rather it should be devised from scratch using genuine input from experts and reliable economic reports. I believe the government should hold a one-day workshop with representatives from international institutions like the IMF and the UNDP, as well as academics and socio-economic specialists in order to get their feeling and hear their reports and forecasts for next year relating to growth, oil prices, refugees, and unemployment.
Secondly, as oil prices are one of the main determinants of Jordan’s fiscal deficit, through affecting electricity costs, and it is also one of the main pillars in determining the level of inflation, the cost of living, and even the expected government revenue from oil derivatives, I believe the government should hedge by buying a forward option on the quantity of oil needed for the whole year by any price between $45 and $50. This is the right time to do so, as oil prices are on this range today. All forecasts say oil prices are going to be over $50 next year. By hedging today the government will for sure save the country some foreign reserves.
Thirdly, since the budget must be issued via a law, and since the law can be tailored to the needs and requirements of each era—as far as it does not violate the constitution—then the government can issue a budget law that sets a precedence in terms of certain expenditures that can only be justified if they are externally funded. This exercise can be put in the law as a separate new item called “below the line items.” Those items could be current or capital expenditure that are budgeted and approved for spending subject to funding from certain external sources (i.e. subject to foreign assistance or external investment). So the law will ensure that no money can be spent on these items unless they receive the relevant funding.
Finally, it would be a good idea if the government publishes a summary of the consolidated budget of the Kingdom, which is the one that consists of both the budget of the central government and that of the independent government units. This could be produced in the form of a booklet that shows the broad breakdown of the expected macro figures for revenues, expenditures, and fiscal deficit for all public entities in the country.
I believe this government can be the one that would present, for the first time, a different paradigm of fiscal budgeting in Jordan. Nobody says that we have to stick to the old and obsolete way of doing business in public budgeting. Issuing the budget in a law is actually a flexible way that helps to design the articles the way one sees more relevant, not the way others have been doing for decades. I hope we could really see a new, more open, more participatory, and more transparent way of budgeting.