The Jordanian government’s largest capital projects are collectively running more than three times over budget at the halfway stage in the kingdom’s financial year, according to officials.
Overall spending on the 15 projects, which are all non-military, is expec-ted to reach JD1.7bn ($2.4bn) over the year, according to figures given to MEED by the Finance Ministry’s General Budget Office, which tracks government spending.
The government allocated JD474m for the projects in its 2008 budget. The overspend is significant because it is struggling to address a rapidly growing budget deficit. According to the ministry, the budget deficit for 2008 climbed to JD826m, or 6.5 per cent of gross domestic product (GDP), in July, from JD724m, or 5.6 per cent of GDP, in February.
The ministry’s calculations for the budget deficit assume that the JD1.1bn budgeted for all capital projects in 2008 will be cut by JD110m because of projects being cancelled or postponed.
Ayman Khalaileh, director of studies and economic policies at the Finance Ministry, says spending on capital projects could still come in under budget if ministries abandon or postpone projects over the next few months.
“Most of the withdrawal from the capital expenditure takes place in the second half of the year,” says Khalaileh. “We do not know how much we are going to save until the end of the year.”
However, ministries appear to be reluctant to rein in their spending plans. According to figures com-piled by the General Budget Office, the Public Works & Housing
Ministry will spend JD421m on a road and bridge-building programme in 2008, even though it is only budgeted to spend JD85m. A new road connecting Aqaba and Safi will cost JD36m alone.
The Education Ministry now predicts its plan to build 270 schools will cost JD355m, compared with JD36m in the budget.
“Mostly the money will be spent on new schools, some training for the teachers and maybe some communications and computers,” says Jamal al-Sughaier, second manager of the General Budget Office.
The Health Ministry has also raised its expenditure on
hospitals and clinics, to JD228m from JD42m.
Luc Marchand, Jordan analyst at credit ratings agency Standard & Poor’s, says a large part of the unbudgeted spending may have been authorised after foreign donors approved new grants.
“If there is a large increase in capital expenditure, I can swear that there is a big increase in grants,” says Marchand. “It would be scary if it was not financed partly by grants or private donors.”