May 7, 2020 / 10:46 PM / a month ago

Jordan deficit forecast to rise by $1.4 billion as economy hit by coronavirus - fin min

AMMAN, May 7 (Reuters) - Jordan’s budget deficit is expected to rise by at least one billion dinars ($1.4 billion) as government finances are dealt a heavy blow by the coronavirus’ impact on the aid-dependent economy, the finance minister said.

Mohammad Al Ississ said losses from the lockdown was estimated at 100 million dinars per day ($140 million). The shutdown started in March and was eased in the last two weeks as businesses and industries were allowed to reopen.

“The forecasts in front of us indicate that our deficit until the end of the year will exceed what we expected by at least a billion dinars,” Al Ississ told TV news broadcaster Al Mamlaka, saying the impact was the worst in decades.

The government had estimated a 1.3 billion dinar ($1.8 billion) deficit in this year’s 2020 expansionist budget, characterized by sizeable public sector salary hikes to ensure stability in the aftermath of a wave of protests in the region.

“This is a huge blow to the economy. The situation is difficult, very difficult,” Al Ississ added.

The country’s 2020 growth was also expected to plunge by 3.4% this year compared to the International Monetary Fund’s 2.1% forecast before the crisis.

Al Ississ did not rule out borrowing from global markets to help cover some of the country’s extra financing needs although he cautioned credit markets were also affected.

The cash-strapped government has already resorted to more domestic borrowing from banks in the last two months to cover financing needs, bankers say.

The IMF had approved a $1.3 billion four-year programme for Jordan last March which the kingdom hopes will provide financing from its major Western donors worried about the country’s stability.

Any new borrowing will increase record public debt of $42 billion that is now expected to exceed 100% of GDP from a current 97%.

Debt has spiralled due to years of runaway spending on a rapidly expanding public sector as successive governments sought to appease citizens with state jobs to maintain stability.

The government planned significant spending cuts to offset a steep 600 million-dinar drop in revenue up to April compared to the same period last year, Al Ississ said.

Al Ississ said the government for now did not plan any new taxes, the main source of state revenues.

Any cuts to a bloated state bureaucracy, which incurs 600 million dinars of monthly salary costs, would be politically sensitive.

The country has among the world’s highest government spending relative to the size of its economy.

Fears have mounted that layoffs and bankruptcies resulting from the coronavirus lockdown will deepen poverty and unemployment and eventually trigger civil unrest, officials say in private.

“The matter that most worries us is increased unemployment and poverty,” said Al Ississ said. (Reporting by Suleiman Al-Khalidi; Editing by Cynthia Osterman)

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