Jordan’s government is raising its budget deficit forecast for 2007 by almost 50 per cent after weeks of record oil prices.
The Finance Ministry says it now expects the budget deficit to reach JD 560.9 million ($792.5 million).
At the beginning of the year, the ministry estimated the deficit would be just JD 385 million ($544 million).
Government spending has risen dramatically along with oil prices, because petrol prices in the kingdom are heavily subsidised.
The new budget deficit forecast has been supplied by Eassa Saleh, director of studies and economic policy at the Finance Ministry.
“They have revised the deficit up to 5 per cent of GDP, which is a deficit of JD 560.9 million, based on $75 a barrel for crude,” says Tristan Cooper, a senior analyst at ratings agency Moody’s Investors Service.
Before the ministry raised its forecast, Moody’s predicted Jordan’s budget deficit would be 4.4 per cent of GDP for the year, or JD 493.9 million ($697.4 million). While oil has been trading well above the $75 level in recent weeks, reaching in excess of $98 a barrel in early November, the deficit is unlikely to rise much further this year.
“Given that we only have two months of this year left, further increases in the price of oil would only push the deficit up to JD 570 million-580 million ($805 million-820 million),” says Cooper.
He dismisses a recent claim by independent Jordanian economist Fahad Fanek that the deficit will reach JD 900 million ($1,271 million) as “a significant exaggeration” (MEED 26:11:07).
Jordan’s Finance Minister Hamad Kasasbeh has pledged to remove the last government subsidies on petrol prices at the beginning of 2008
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