Jordan aims to cut budget deficit by a third

Jordan aims to cut its budget deficit by about a third this year to curb the impact of soaring fuel import costs and high social spending linked to the wave of Arab uprisings.

Finance ministry sources said on Thursday the draft 2013 budget aimed to reduce the 2013 deficit to 5.4 percent of gross domestic product (GDP) from 7.9 percent last year.

Jordan suffered widespread civil unrest after the country moved in November to end fuel subsidies. Protests turned violent in impoverished rural areas where rioters for several days torched government buildings and looted scores of banks.

The International Monetary Fund (IMF) last month applauded the decision to abolish fuel subsidies, part of a fiscal consolidation plan aimed at reducing the budget deficit and securing a $2bn standby loan from the IMF.

The ministry sources said the draft 2013 budget has been set at JD7.45bn ($10.5bn) and emphasises fiscal prudence to reduce the deficit to JD1.31bn from JD1.76bn forecast for 2012.

The latest 2013 estimate of state expenditure includes JD850m of grants from donor countries, which are traditionally used to cover some of the budget shortfalls.

Arab uprisings in the region have hit Jordan's domestic demand and foreign cash flows, including remittances from expatriates in the Gulf.

But the biggest damage to the economy came after the revolution in Egypt disrupted cheap gas imports, forcing the kingdom to switch to much more expensive fuel oil to cover its electricity needs.

The authorities say it is crucial to push for budgetary discipline under an IMF-guided fiscal consolidation plan.

The sources said 2013 economic growth was expected to be around 3 percent, the same as forecast for 2012.

The 2013 budget allocates JD6.21bn in current state expenditure, mainly public sector pay, and puts aside JD1.24bn for capital spending, the sources said.

Independent economists warn about the long-term sustainability of high public spending to maintain a bloated civil service that includes large military and security services.