Jordan's government approved this week a JD7.456 (US$10.5bn) budget for 2013 with an estimated budget gap of JD1.3bn or 5.4 percent of GDP.
The draft budget sets current spending at JD6.210bn, a decline of 2.1 percent from 2012 and capital expenditure soaring 76.6 percent to JD1.246bn, the state-run Petra news agency reported, the country's ministry of finance said. Revenue is forecast at JD6.146bn, of which JD850m is in foreign grants.
The budget deficit is JD2.160bn without foreign grants and JD1.310bn after adding foreign aid. Jordan finances its budget and current-account deficits with foreign investment and grants from Gulf states, the EU and the US.
The kingdom, which has one of the smallest economies in the Arab world and with no natural resources, imports all of its energy and until recently was dependent on Egypt for its gas supply, which has caused its public debt to soar. Jordan’s import bill for fuel accounts for about 20 percent of GDP.
The kingdom's debt to GDP ratio has increased to about 72 percent of GDP in the first nine months of the year up from 64 percent last year, according to official figures from the ministry of finance.
Jordan's economy is forecast to expand 3.5 percent this year from an estimated 3 percent in 2012, while inflation is projected to fall to 3.9 percent from 4.5 percent last year, according to the International Monetary Fund.
"The country has faced challenges during the year from the disruption of the flow of natural gas, the ongoing conflict in Syria, and an acceleration of influx of refugees," the Washington-based organisation said in a report late last month. "Combined with higher oil and food prices and a shortfall in grants, this has put further pressure on the country’s economy. Nonetheless, growth is expected to increase."
“Despite this challenging environment, the authorities have been implementing sound macroeconomic policies aimed at reducing fiscal and external imbalances in a socially acceptable way," the IMF added. The removal of general subsidies on all fuel products except liquefied petroleum gas on November 14 "was an important step,'' the organisation said, adding the measure helped reduce costs and risks to the budget from fluctuations in oil prices.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.