The government budget
is usually its strategy and blue print for what it is going to do in the coming
year to stimulate the economy. December is that time of the year when we sit
around and discuss the proposed government budget. The perpetually hopeful
question is, does this budget bring anything new?
اضافة اعلان
The question is important because of the state of
the economy: low real economic growth, at 2.7 percent, high unemployment rate,
22.6 percent, with 49 percent youth unemployment, 12 percent women’s
participation in the labor force (the lowest in the world), and a public debt
that exceeds 112 percent.
What, then, does next year’s budget bring to
ameliorate such a gloomy situation?
Let me start the brief analysis with some of the
assumptions of the Ministry of Finance: 1) The real economic growth rate is
expected to be around 2.7 percent; that is, there will be no change in the
growth rate. 2) The inflation rate is projected at 3.8 percent (lower than the
current average of 4.1 percent). By adding the two, one would expect a nominal
economic growth rate of 6.5 percent, which is good news for the government, as
it helps increase its revenues, especially from indirect taxes (customs, sales,
tax, etc.) and fees.
The general government revenues are expected to grow
by almost 10 percent, with revenues from taxes rising by JD696 million, and
non-tax revenues by JD133 million. This increase is to happen without the
imposition of new taxes or fees, as promised by the Ministry of Finance, which
means that there will be greater emphasis on tax collection and raising the
fees that the government charges for its services, which the government can
raise without seeking the approval of the Parliament.
Non-tax revenues (fees mainly, which will be around
JD2.1 billion) will rise by 6.7 percent, and continue to constitute one third
of tax revenues, or about 22 percent of local revenues. The fact that the
government has come to rely so much on raising fees is not a good practice, as
this increasing the opaqueness of fiscal policy and makes the investment,
production and consumption environments less certain.
Current expenditures will increase by JD767 million,
or 8.5 percent, over their level in 2022. About JD3 billion of expenditures
will go to the military and public security apparatuses, making spending on the
military and security higher than spending on education, health, and
transportation by about 8 percent. This spending category has been increased by
JD252 million over its 2022 level.
… while we generally complain about the falling quality of our education system, we do little about it. Furthermore, why use the word ‘subsidy’? They are public universities; their budgets should come from the state not from heightened and distorted tuition structures such as the parallel tuition system that enables university not based on merit but on financial capability.
Interestingly, spending under the item “subsidy to
government universities” remains next year at JD70 million, it will be the same
for the coming years and is similar to that of recent years — in 2021 the
subsidy was JD74 million. This in spite of the increase in the number of
students year after year.
In other words, while we generally complain about
the falling quality of our education system, we do little about it.
Furthermore, why use the word “subsidy”? They are public universities; their
budgets should come from the state, not from heightened and distorted tuition
structures such as the parallel tuition system that enables admission to
university not based on merit but on financial capability.
If the government wishes to remove this paltry level
of spending, then it might be time it privatized universities and did away with
higher public education — which would be a disaster.
Another hidden gem in the budget that should draw
one’s attention is capital expenditure. This item is imperative for the
development of Jordan; it is an investment in the future of the country and key
to moving it out of its current economic malaise.
The budget claims that capital expenditures in 2023
is JD1,592 million, which is higher than the 2022 allocation by JD100 million.
Unfortunately, a quick review of the sub categories under this item shows a
different story: most capital expenditures (83 percent) will be spent on
ongoing and continuing projects. Only JD262 million (17 percent of capital
expenditures) will be spent on new projects in 2023. Thus, actual new capital
expenditures will be around 2 percent of the total government spending.
Note that the so-called capital expenditures, as
pointed out by the now forgotten Jordan National Agenda in 2005, are 75 percent
current expenditures (salaries and the like). Furthermore, this is not the end
of the story: the Budget Law allows the Ministry of Finance to shift
allocations from capital expenditures to current expenditures, but it cannot
shift allocations from current expenditures to capital expenditures. This
obvious bias enabled ministers of finance to shift resources from capital
expenditures after the budget is passed. Consequently, even this paltry sum is
not certain.
The debt level will increase as growth remains
dormant and interest rates rise as promised in the budget. Debt will rise
because, according to this budget, the government will continue to do as others
in the past, hoping that the same thinking and approaches will yield different
results. They will not.
In addition to the above, one recalls that there was
a promise last week to dedicate JD355 million for the implementation of the
recently released Economic Modernization Vision. It is difficult to discern how
the government will allocate funds to the eight pillars of the vision.
There is nothing new in the budget except that it
merged the budgets of the central government and those of the independent
government bodies into one budget, which has been a longstanding request, not
only locally but also by donor organizations. Moreover, this is not a
development budget.
Yusuf Mansur is CEO of the Envision Consulting Group and
former minister of state for economic affairs.
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