Jordan PM says 2020 budget to focus on growth to ease unemployment

Economists and analysts say low growth and insufficient job creation are kingdom’s two main problem

Jordanian Prime Minister Omar al-Razzaz speaks at the Jordan Growth and Opportunity Conference on February 28, 2019 in London. / AFP / POOL / TOBY MELVILLE

The Jordanian Prime Minister, Omar Al Razzaz, said the country's draft 2020 budget, approved by Cabinet on Wednesday, aimed to spur stagnant economic growth and create jobs to ease high unemployment.

Mr Al Razzaz told university students that maintaining Jordan's economic and financial stability, rather than imposing new taxes encouraged by the International Monetary Fund, was the main driving force for the draft budget.

Those taxes triggered protests in 2018 that were the biggest in years.

"Our direction now is not to raise taxes but to attain economic growth that leads to jobs for youths," Mr Al Razzaz said.

The budget will be sent to Parliament for approval and its details will be unveiled on Thursday.

Economists and analysts say low growth and lack of job creation are the kingdom’s two main problems, although they should not be tackled at the expense of reining in public debt, which has hit a record 94 per cent of gross domestic product.

Officials say the 2020 budget deficit is expected to almost double to about 1.3 billion dinars (Dh6.74bn) with wage rises Mr Al Razzaz has pledged next year for public-sector employees.

Jordan is hoping for direct cash support from major western donors that traditionally cover chronic budget shortfalls.

A staunch ally of the US, Jordan has suffered years of instability at its borders, including wars in Iraq and Syria, and conflict in the Israel-occupied West Bank.

The IMF ended a mission last week that was concerned the kingdom could not meet revenues targets and lower public debt under a three-year extended fund racility agreement that just ended.

The IMF warned on Monday that public debt was still very high and the challenge was to push growth beyond an average 2 to 2.5 per cent, where it has been stuck for almost a decade, to lower poverty and youth unemployment, which has risen to 19 per cent.

The Fund said it had begun talks about a new three-year programme that would give priority to growth and job creation.

Jordanian officials, mindful of mass protests in neighbouring countries, including Lebanon and Iraq, in the past month over living standards and corruption, have warned the IMF that more austerity moves could spark civil unrest.

Growing impatience among Jordanians over austerity measures and high taxes prompted large street protests in 2018 against corruption and mismanagement of public funds.

The government in October reached a costly pay deal with the teachers' union to end an unprecedented nationwide strike.

The Cabinet also raised pensions for military retirees, which economists said was giving in to populist demands at the expense of fiscal prudence.

Mr Razzaz admitted more than 65 per cent of the budget's expenditure was on salaries, in a country with some of the highest government spending compared to the size of the economy.

Jordan's public sector has over the last two decades expanded rapidly as governments sought to appease citizens with state jobs to maintain stability.