Jordan has significantly reduced its fiscal deficit since it spiked to 10.3% of GDP in 2014. According to the IMF, the deficit fell to 5.3% of GDP in 2015 and to 3.2% in 2016, exceeding earlier predicted targets of 3.8%. The near-term outlook is even more positive, with the IMF forecasting that the figure would drop to 2.5% of GDP in 2017 and 0.4% in 2018.
Debt instruments have played an important role in these improvements, with the IMF reporting that the government issued JD5.5bn ($7.7bn) of Treasury bills (T-bills) and Treasury bonds (T-bonds) in 2016, diversifying its mix of instruments by reintroducing six-month T-bills, two and three-year T-bonds and five-year floating-rate T-bonds, as well as inaugurating a 10-year T-bond issuance in September 2016. In April 2017 the MoF issued a $500m eurobond offering a yield of 5.88%. The bond was more than three times oversubscribed and will mature in 2026.
Sukuk (Islamic bonds) issuances are also expected to play a larger role in the future, after the government issued its first sukuk in October 2016 (see Financial Services chapter).
According to the MoF in its January 2018 bulletin, general revenues increased from JD7.1bn ($10.0bn) in 2016 to JD7.4bn ($10.4bn) in 2017, including JD6.7bn ($9.5bn) of domestic revenues and JD707m ($997m) of grants. Meanwhile, capital expenditure climbed to JD1.06bn ($1.5bn), up from JD1.03bn ($1.45bn) the previous year, contributing to total spending of $8.2bn ($11.6bn) in 2017, approximately JD200m ($282.1m) more than in 2016.
After grants, the budget deficit dropped from JD879m ($1.2bn) in 2016 to JD748m ($1.1bn) in 2017, or from 3.2% to 2.6% of GDP. Excluding grants, the deficit reached 5.1% of GDP, falling from JD1.7bn ($2.4bn) in 2016 to JD1.5bn ($2.1bn). The 2018 budget bill, which was approved in January of that year, forecast JD8.5bn ($12bn) of revenues, JD9bn ($12.7bn) of spending, with current expenditure expected to reach JD7.9bn ($11.1bn) and capital expenditure to hit JD1.2bn ($1.7bn), and a fiscal deficit of JD543m ($766m).
In December 2017 the Greater Amman Municipality council approved the 2018 draft budget for Amman, which was allocated JD498m ($703m), the biggest share of all the municipalities. The overall municipality budget in 2017 was JD362m ($510.7m). A total of $60m in debt had been paid in the same year, according to the Ministry of Municipal Affairs.
An increase in tax inflows, which dominate state income, fed into better overall revenue in 2017. According to data from the January 2018 bulletin published by the MoF, total tax revenues have risen every year since 2013, when they stood at JD3.65bn ($5.2bn), to JD4.04bn ($5.7bn) in 2014, JD4.10bn ($5.8bn) in 2015, JD4.26bn ($6bn) in 2016 and JD4.34 ($6.1bn) in 2017.
The boost in total tax income was mainly due to tax receipts from goods and services, which increased by about 3.8% to JD2.99bn ($4.2bn) in 2017. Contributing the most to this total was sales tax revenue on imported goods, which rose from JD1.02bn (1.44bn) in 2016 to JD1.04bn ($1.47bn) the following year. An 11% rise in revenue from domestic goods brought the 2017 total to JD676.7m ($954.6m).
In its July 2017 Article IV consultation for Jordan, the IMF commended the country’s ongoing money-generating tax reforms, including the removal of Customs duty exemptions (excluding food and basic health items) and general sales tax exemptions in 2017, noting that together with wider structural reforms within the energy and water sectors, they demonstrate an improvement in public financial and debt management. Increased revenue generation will likely remain the preferred near-term solution for addressing the fiscal deficit, with the IMF recommending the government next divert its attention towards personal income tax reforms (see overview).
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