COVID-19 dictates monetary policy

Salameh daraawi
Salameh Darawi (Photo: JNews)
In this phase of the pandemic, the government’s priorities should focus on three aspects: providing salaries and securing debt service amounts, providing enough allocations to support the healthcare sector, and sustaining finances to cover the expenditures of various public institutions. اضافة اعلان

These three priorities cannot be achieved through self-reliance. The money to cover them cannot be drawn directly from the Treasury due to the fact that the pre-grant budget already suffers from a deficit that exceeds JD2 billion, and the government needs some JD580 million every month to finance its spending.

Meanwhile, the government’s monthly revenue — drawn from taxes, fees, and customs — does not exceed JD430 million. The deficit is usually covered through domestic and foreign debts. This is a decade-long monetary mechanism, where the Treasury resorts to imposing new fees and taxes or borrowing to cover such differences.

Because of COVID-19, and its financial impact on various public and private sectors, as well as the need for additional funds to secure the stability of the national economy, the government opted to borrow to overcome the financial repercussions of the pandemic.

In total, the government’s 2020 direct loans exceeded JD2.2 billion, including JD1.5 billion in foreign loans in the form of Eurobonds. The rest was secured from domestic sources through bonds.

Conditions may not be much different this year due to delays in vaccine distribution and a possible return of partial and full lockdowns, which means that the Treasury will lose revenues estimated in the 2021 government budget. At the same time, financial burdens are accumulating day by day on a wide variety of individuals and workers in the private sector.

All of these factors have forced the government to think about possible procedures to protect these sectors through programs within the state’s financial means.

The procedures that the government announced last week are not aimed at stimulating the economy or providing welfare, yet they can be described as an attempt to take on some of the financial burdens of those hit hardest by the pandemic.

The Treasury does not have the additional funds to spend on any items that are not mentioned in the budget, and all it has managed to provide is no more than JD208 million, part of which was secured through a foreign grant.

The COVID-19 crisis has greatly affected the national economy, which is already burdened, and achieving growth again will be governed by the developments of the pandemic.

We have to count on having access to vaccines, especially since inoculation and a commitment to precautionary and safety measures are the two main factors in guaranteeing the normalization of economic activities.