Amman faces cuts to pay for subsidies

04 April 2008
Amman will have to cut spending by 24 per cent this year or find an additional JD267m ($377m) in revenue, after the reintroduction of subsidies for gas and barley.

If the government fails to find a way of paying for the subsidies, the budget deficit could become even larger than the JD724m, or 5.6 per cent of gross domestic product (GDP), the Finance Ministry has forecast for 2008.

King Abdullah II unexpectedly reintroduced subsidies on 15 March having authorised the ending of them from 8 February.

“It will cost JD155m for the whole year for not liberalising gas and barley,” says Ayman Khalaileh, head of the research directorate at the Finance Ministry.

Finance Minister Hamad Kasasbeh acknowledged in February that the government faces a battle to stop the budget deficit growing (MEED 22.02.08).

The government has already had to find an extra JD190m after parliament put pressure on it to boost wages for civil servants and members of the armed forces.

In an effort to keep the deficit under control, it is also planning to cut spending by 10 per cent, or by JD112m.

Kasasbeh has yet to reveal how he will pay for the JD155m for the reintroduction of gas and barley subsidies. If the government fails to find a solution, the deficit will climb to JD1.07bn, about 8.2 per cent of GDP, by the end of 2008.

The Finance Ministry wants to link public sector wages to inflation and introduce performance-related pay to bring government spending under control in 2009.

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