اقتصاد

Budget 2023: What are the government's contingency plans if revenue is not realized?

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Al-Anbat -
Al-Anbat- Sabaa Alsukkar 

Translated by: Mays Alshawabkeh
 
 The budget size is 11.4 billion dinars, whereas it was less than 10.7 billion dinars last year, according to economist Husam Ayish, who also told Alanbat that there is an increase in expenditure from last year of about 800 million dinars that needs to be reviewed. The increase in expenditure rate also exceeds the percentage increase in revenues, which will rise by 7.4%. Either public spending will rise by 8.3%, or it will total 1% more than that.
 
He said that the general revenues are anticipated to be 9.6 billion dinars, or roughly 8.8 billion dinars, and that they are expected to contain 6.6 tax revenues, up 11.7%, and non-tax revenues, totaling 2.1 billion dinars. Domestic revenues are anticipated to rise in the 2023 budget by 10.4%. 

The government is working to increase domestic revenues because the budget projection for this year was roughly the same. Public revenues, particularly grants and loans, have a direct impact on the budget deficit, which reached 2.7 billion dinars (without grants and assistance), and if they are included, this deficit falls to 1.9 billion dinars, which means that it affects the overall picture of the budget deficit; It is one of the primary causes of the country's continued high levels of debt, with debt interest estimated to be 16% of current spending, or roughly 1 billion and 600 million dinars, i.e., estimated expenditure as debt interest exceeds any spending allotment for any ministry or government agency in various sectors.

He continued by saying that these benefits, which are now increasing due to high interest rates, the Ukrainian-Russian War, and the cost and accessibility of funds, as the government claims, call for the government to do more than just boast about increasing tax revenues, particularly in the area of income tax. In the first nine months of this year, revenue was at least 29% higher than anticipated in the budget, totaling roughly 1 billion and 330 million dinars. 

He said that the government should discuss cost-control successes rather than income successes because the budget may have been able to account for its role from this 700 million dinar minimum increase.

The government was excused from performing its obligation to reset, recycle, and regulate expenditures when the minister of finance mentioned that wage, salary, and retirement expenses accounted for 64% of all spending. 

The anticipated current spending came to almost 9.8 billion dinars. 90% of these expenses are paid for by income, leaving 10% or just under 1 billion dinars to be spent. stating that debt will be used to finance capital expenditures worth 1 billion and 600 million dinars, even though the government is aware of the high cost of debt, which comes to 1,600 million dinars in interest and is greater than or equal to the value of capital expenditures, and emphasizing that halting capital expenditures will have a significant negative impact on economic growth. 

He pointed out that the projected growth is 2.7% in real terms while 6.6% nominal growth by including inflation has increased GDP growth by about JD 37 billion and indicates that the budget deficit ratio calculation will decrease from 3.4% to 2.9% because nominal growth rather than real GDP is taken into account. Affirming that the picture painted is not the one that has been widely distributed. This is because inflation has increased the size of the GDP, and we have assumed a 3.9% inflation rate even though the Finance Minister had predicted a 37 billion dinar GDP. 

Indicating that the government's bet on economic development in the 2023 budget will be its main driver, he added that the budget should have kept up with the vision of economic modernization at the level of clearly tying expenditure in the targets. While it was necessary to assess the manner of using such expenditures, new projects totaling 263 million dinars asked about the process in the distribution of capital expenditures and their usefulness when compared to expenditures made ten years earlier. 

Ayish demonstrated that it was problematic that the budget performance for 2022 was not evaluated until it assessed how the government operates with expenditures, revenues, and budget results in order to identify strengths and weaknesses as well as opportunities in the framework of strategic analysis. Before we evaluate the budget that the government has adopted and reach a new balance of real data, without the justification of expenditure and increase, the reasons for the positive or negative outcomes are not clarified. 

According to economic analyst Adly Kandah, the government will borrow a total of 8776.5 million dinars—or roughly 8.8 billion dinars—during 2023 from domestic sources (banks and social security funds investment fund) and from external sources, including financial markets, international institutions, and the issuance of Eurobond bonds in dollars. 

According to the data, internal loans—which are expected to budget more than 5.6 billion dinars and make up over 64.1% of all sources of financing—are the primary source of funding. In contrast, external finance accounts for 35.9% of the budget and amounts to about 1.7 billion dinars in the form of loans from foreign organizations. 1.3 billion dinars were used to issue local bonds in dollars, 709 million dinars were used to issue Eurobond bonds, and 42 million dinars were used to finance capital projects using outside financing. 

The following would be done to balance the funds using the accrued balances: using 4,275 million dinars (or roughly 4.3 billion dinars) to pay off the internal debt due in 2023, 1862 million dinars to close the budget gap, 1325.8 million dinars to retire local dollar bonds, and 599.6 million dinars to settle outstanding loan premiums from external sources; 248.1 million dinars to pay off local loan instalments in dollars, 232.7 million dinars to settle government loan arrears, and 228.9 million dinar.  

Kandah predicted that net domestic debt would rise by 1,350.38 million dinars, while external debt would rise by 953.8 million dinars, based on budgetary information, fresh extinguishments, and loans. The estimated rise in the total public debt for 2023 would be 2.3 billion dinars, or around 2304.1 million dinars. 

The budget report predicts that the public debt will increase faster than the nominal GDP growth rate in 2023, increasing the budget's burden from 149 million dinars in debt interest payments in 2023 to 1.577 billion dinars compared to 1.428 billion in 2022. 

86.1% of all public expenditures are still current expenses. 13.8% of total expenses are made up of debt interest. This percentage is about similar to the budget's expected 1,591.9 million dinar component of capital expenditures. 

Kandah questioned the impact of the fluctuating global oil prices in light of the crises and the installation of a cap on the price of Russian oil in the markets at $60 per barrel with regard to the world oil on which the budget's assumptions were based  the unpredictability of the global economy, too? And does the government have backup plans besides turning to the world's markets for borrowing if revenue is not realized? Domestic borrowing," arguing that the government's use of such a large amount of domestic borrowing results in the private sector being crowded out of the banking system's liquidity and tempts banks and the Guarantee Funds Investment Fund to lend to the government rather than seeking safety in significant capital projects that create new sustainable jobs and a much-needed economy.
 
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