Saturday, January 06, 2007

The 2007 budget and the house finance committee

The financial committee of the parliament has finished reviewing next year’s budget, and has generally approved it. The only modification was shaving 71 million dinars from the budget from capital expenditures. These cuts are not to affect government projects. Don’t ask me how, because I don’t know. This is not to say that the committee believes in what they have recommended. Last year, they ended up voting down their own recommendations on the floor of the house.

Since elections are coming up, it is now time to ensure that MP’s have something good to tell their constituents. This year, the financial committee made such an attempt early on, suggesting that they will not approve the budget unless it contains salary rises for government employees, who have not had a pay raise since 1986. The government promised to “study” the request, and said this will be part of a long awaited reform of the public sector. This reform includes making the government more lean and efficient, along with the pay raises. In other words, the pay raises will happen when pigs fly.

Anyway, after everybody made the proper noises, the committee set the pay raises issue aside and gave their economic recommendations to the government. These (nonbinding) recommendations include the pay raises, no rise in fuel prices (yeah, right), and somehow fixing the structural problems in the economy using clear executive plans and time frames. This last one sounds good even though it is practically meaningless.

The committee also recommended the use of financial tools to reduce inflation. Of course, raising the pay scale (if it happens) will fuel inflation. I suppose that they think that by waving a magical financial wand, they can make that go away, presumably by raising interest rates. Good news if you want to buy a house.

They also want to improve competitiveness of Jordanian products, improve public administration, improve health services, education, water and energy supply, obtain self reliance, stop sprawl in government agencies, merging agencies with similar mandates, and putting budgets of independent establishments under parliament supervision (as if they are going to do a better job than they did here). They forgot to ask for a pony.

None of these recommendations have anything to do with the budget. There is still no explanation for why running costs of the government (after removal of fuel subsidies) swelled by one billion dinars in one year. I am eager to get an answer.


At 12:51 AM, Anonymous Anonymous said...

you write very well about the economic state of Jordan. Jordan really needs those "devil advocates'" comments and opinions in order to correctly assess their situation.

my observation is that Jordan is destined to benefit greatly from future development in the middle east. firstly, once Iraq becomes a fully functioning country, the halo effect will reach Jordan in no time. secondly, oil prices are not showing any signs of retreat. although that might hurt low income families in Jordan, it will bring in more FDI from those oil rich gulf countries. in addition, I believe the reinstatement of mandatory service in the army and the goal of training young Jordanians to do manual work will inject the Jordanian economy of a better, hopefully, specialized work force, which will increasingly lure in FDI.

At 7:41 PM, Blogger Khalaf said...

El Tapatio: Welcome to my blog. I am also optimistic about the long term economic situation. However, this is not because I have a lot of trust in how the government is handling the economy or the distribution of resources. The best thing the government can due is to ensure security and minimize it's interference in the economy. Today's post critiques government expansion as services are diminished.

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