Jordan Times
Thursday, March 29, 2007
Exchange rate changes of major
world currencies push outstanding external debt up to JD5,186m at end of ‘06
By Samir Ghawi
AMMAN — The Jordan’s outstanding external debt at the end of 2006 totalled the
equivalent of JD5,186.50 million compared to JD5,056.67 million at the end of
2005.
The General Government Finance Bulletin issued by the Ministry of Finance
attributed the increase to a noticeable rise of major international currencies
last year against the US dollar and, thus, against the Jordanian dinar.
As a percentage of the gross domestic product (GDP), the outstanding external
public debt stood at 51.4 per cent at the end of 2006 compared to 56.1 per cent
at the end of 2005.
According to the bulletin, the ratio of debt in euros and pound sterling to the
total of external debt went up from 20 per cent and 8.6 per cent at the end of
2005 to 21.6 per cent and 9.3 per cent respectively at the end of last year.
“On the other hand, the ratio of debt in US dollar, Japanese yen and Special
Drawing Rights declined from 30.9 per cent, 19.4 per cent and 4.5 per cent at
the end of 2005 to 30.2 per cent, 18 per cent and 3.3 per cent respectively at
the end of 2006,” the bulletin indicated.
On cash basis, total external debt service (government and
government-guaranteed) during 2006 amounted to JD445.5 million of which JD297.1
million were principal payments and JD148.4 million were interest payments.
Taking into account rescheduled debt during 2006, debt service on a commitment
basis rises to JD593.6 million, of which JD393.3 million were principal payments
and JD200.3 million were interest payments.
The Ministry of Finance detailed as follows the JD112.8 million or $158.9
million external loans (government and government-guaranteed) contracted during
2006:
— An Arab Fund for Economic and Social Development loan amounting to $34.6
million for the transport sector.
— Islamic Development Bank loans amounting to $39.4 million for the health
sector.
— A German Reconstruction Bank loan amounting to $14.6 million for water sector.
— A Korean loan amounting to $20.8 million for the water sector.
— An OPEC loan amounting to $10 million for the health sector.
— A Saudi Fund for Development loan amounting to $30 million for the health
sector.
— An Italian loan amounting to $9.5 million for the water sector.
Total withdrawals of external loans to finance various economic and development
projects amounted to JD191.4 million last year.
The bulletin showed a JD274 million drop in the net outstanding domestic debt
(budgetary and own-budget agencies) at the end of last year to JD2,163 million,
an amount which represented 21.4 per cent of the estimated GDP for 2006 compared
to JD 2,437 million or 27 per cent of the GDP at the end of 2005.
The decline was a result of a decline in net outstanding domestic debt/budgetary
by JD39 million or 1.6 per cent, and a similar decline in net outstanding
domestic debt/own-budget agencies by JD235 million.
The fall in net outstanding domestic debt/budgetary was an outcome of the
increase in central government’s deposits at the banking system by JD553 million
on one hand, and an increase in its debt by JD514 million on the other, compared
to their levels at the end of 2005.
The drop in net outstanding domestic debt/own — budget agencies resulted from an
increase in the banking deposits of own-budget agencies by JD215 million and a
decline of their debt by JD20 million at the end of 2006 compared to their
levels at the end of 2005.
As a result, net outstanding public debt (domestic and external) at the end of
2006 stood at JD7,350 million, down by JD144 million or 1.9 per cent below its
level at the end of 2005.
The amount represented 72.8 per cent of the estimated GDP for 2006, compared to
83.2 per cent of the GDP for 2005, reflecting a sizable fall by 10.4 percentage
points of GDP.
The finance bulletin provided main points regarding total revenues and grants,
total expenditures and the overall deficit.
Total revenues and grants rose by JD406.6 million to JD3,468.7 million or 13.3
per cent compared to their level in 2005. This was achieved despite the
noticeable JD196.1 million decline in foreign grants which reached JD304.2
million or 39.2 per cent below their level in 2005.
Domestic revenues amounted to JD3,164.5 million during 2006 compared to
JD2,561.8 million in 2005, an increase of JD602.7 million or 23.5 per cent. The
increase in domestic revenues was a result of a JD367.7 million rise in tax
revenues, an expansion in nontax revenues by JD230.8 million, and an increase in
repayments by JD4.2 million.
The rise in tax revenues was mainly due to the improvement in both the General
Sales Tax (GST) and income tax.
The GST increased by JD195.7 million or 19.1 per cent and accounted for 53.2 per
cent of the total increase in tax revenues. Income tax increased by JD127.7
million or 45 per cent and accounted for 34.7 per cent of the total increase in
tax revenues. Customs duties increased by JD10.7 million or 3.5 per cent.
“The overall rise in tax revenues has resulted from the strong economic activity
during the past two years, as well as the obvious improvement in the efficiency
of tax collection,” the bulletin said.
The rise in nontax revenues was mainly due to higher fees amounting to JD78.9
million or 18.6 per cent, driven by a JD44.8 million or 31.3 per cent increase
in real estate registration fees, which reflects the expansion of the
construction activity in the Kingdom.
“Interest and profits” item’s also increased by JD43.6 million or 44.5 per cent
resulting from the rise in the revenue surplus of the Telecommunications
Regulatory Commission.
Other nontax revenues rose by JD105.1 million, resulting from licensing proceeds
of some companies in the telecommunication sector.
Loan repayments amounted to JD43.9 million during 2006 against JD39.7 million in
2005, an increase of JD4.2 million or 10.6 per cent.
Total central government expenditures/budget rose by JD373.4 million or 10.6 per
cent to JD3,912.3 million compared to JD3,538.9 million during the year 2005.
The rise in total expenditures was a result of an increase in current
expenditures by JD214.8 million or 7.4 per cent, and a parallel rise in capital
expenditures by JD158.6 million or 25.1 per cent.
The increase in current expenditures during 2006 was mainly due to the increase
in “defence and security” expenses, pension and wages by JD93.2 million, JD73.9
million and JD28.2 million, respectively, which resulted from the regular annual
increase in these items and the impact of the direct cash compensations paid to
public employees and pensioners after raising the prices of fuel products.
Interest payments rose by JD50.9 million as a result of an JD38.8 million
increase in domestic interest payments and a smaller increase in external
interest payments by JD12.1 million. This composition reflects the fiscal policy
stance to focus more on internal borrowing in financing Jordan’s budget deficit.
Subsidy declined during the year 2006 compared to its high level in 2005.
The above mentioned fiscal developments have resulted in an overall JD443.6
million budget deficit or 4.4 per cent of the estimated the GDP during 2006
compared to a deficit of JD476.8 million or 5.3 per cent of the GDP in 2005.
Excluding foreign grants, the overall deficit amounted to JD747.8 million or 7.4
per cent of the estimated 2006 GDP against a deficit of JD977.1 million or 10.8
per cent of GDP in 2005.
The budget deficit registered in 2006 was lower than the targeted level in the
budget law and its supplement by JD249.9 million or 2.6 percentage points of the
GDP.