Jordan PM pledges budget austerity

(MENAFN - Jordan Times) Prime Minister Nader Dahabi on Wednesday said that the 2010 state budget "will not rely on uncertain foreign assistance or local revenues that may not be realized".

Stating that the budget deficit represents the biggest challenge for the government and that monetary reforms are needed to address the problem, the premier indicated that the budget will feature austerity measures to reduce the deficit, the Jordan News Agency, Petra, reported.

He made the remarks at a meeting with the board chairpersons and CEOs of the operating banks in the Kingdom, held at the Central Bank of Jordan (CBJ).

He announced that the government will extend its guarantee on deposits of any size at all banks operating in Jordan up to the end of 2010.

In October last year, the government decided to guarantee deposits up to the end of 2009.

Dahabi explained that the government will boost small and medium enterprises (SMEs) by establishing a risk capital fund, calling on banks to consider providing credit facilities to SMEs that do not have enough guarantees.

According to Dahabi, the new income tax draft law, which was withdrawn from the Lower House recently, seeks to stimulate the Kingdom's economy as tax rates on businesses will be reconsidered. He added that the government plans to create new markets for Jordanian products and increase exports to current markets.

Dahabi also expressed his confidence in local banking sector's performance.

The premier commended new instructions issued by the CBJ covering credit rating, imposing conditions on doubtful assets and lowering the mandatory reserve rate, which resulted in greater liquidity in the market.

Confirming that no bankruptcies occurred despite the drop in local bank profits during this year, the premier noted that not only Jordanian banks but also financial institutions worldwide adopted stricter lending measures due to the global financial crisis.

Dahabi attributed the increase in capital spending to the early approval of the budget, which expected revenues to be higher than they turned out to be. During the first nine months of this year, local revenues grew only by 2 per cent, a figure he considered very low when compared with a 30 per cent growth in capital expenditure.

Public debt, both internal and external, reached JD9.5 billion during the first nine months of this year, representing 58.6 per cent of the gross domestic product, the premier noted, explaining that the percentage should not exceed 60 per cent according to the Public Debt Law.