Jordan's 2010 Budget Hits Government Agencies Hard with

UNCLAS SECTION 01 OF 03 AMMAN 000320

SENSITIVE
SIPDIS

STATE FOR NEA/ELA AND EEB
STATE PASS USTR
TUNIS FOR FSI STUDENT WONG
MALABO FOR MOSS

E.O. 12958: N/A
TAGS: ECON ECIN EFIN EAID PGOV JO
SUBJECT: Jordan's 2010 Budget Hits Government Agencies Hard with
Capital Expenditure, Hiring and Travel Cuts

REFS: A. 09 Amman 2673

B. 09 Amman 2572

C. 09 Amman 2408

D. 09 Amman 2190

E. 09 Amman 2064

F. 09 Amman 1932

G. 09 Amman 1646

H. 08 Amman 2982


1. (SBU) Summary: The severe cuts to the 2010 budget have hit
Government of Jordan (GOJ) ministries hard (ref A). With a
projected deficit of $1.43 billion, the 2010 budget of $7.71 billion
includes 20% cuts to capital expenditures and 1.4% cuts to current
expenditures, and will impact GOJ entities by curtailing their
ability to hire new employees, and forcing cuts in overtime,
official travel, and purchases of vehicles and furniture. The tight
budget could also impact the USG as Jordan will likely request
additional financial and technical assistance to compensate for
budget shortfalls. Existing reform and development projects
requiring new staff or construction will also face financial
constraints. Budget difficulties will be more pronounced during the
second half of 2010, as revenues are expected to decrease from 2009
levels, due to lower income and sales tax revenues. End summary.


2. (SBU) A recurring theme during recent EconOff engagement with GOJ
officials from a broad spectrum of ministries and other agencies is
the significant impact of Jordan's budget deficit and the cuts in
the 2010 budget on GOJ entities. Jordan's 2010 budget, with $6.74
billion in projected revenues, $7.71 billion in expenditures, was
approved on December 8, one day before the cabinet shake-up (ref A).
The budgeted deficit before grants for 2010 is targeted at $1.4
billion or 5.8% of Jordan's GDP (estimated at $24.7 billion for
2010)(ref G). EconOffs have heard from GOJ contacts, both during
the last quarter of 2009 and through January 2010, that the budget
crisis of 2009 and the cuts included in the 2010 budget will
particularly impact GOJ public sector capital expenditure projects
as well as the day-to-day operations of all GOJ ministries and other
entities by severely limiting overtime, new hiring, and official
travel. New furniture and vehicle purchases will also be
curtailed.

Capital Expenditures Hit Hardest
--------------


3. (SBU) In reviewing the details of the 2010 budget, capital
expenditures appear to have taken the hardest hits. The Ministries
of Information and Communications Technology, Culture, and
Environment all had at least 30% cuts in their capital expenditure
budgets. The capital expenditure budget of the Ministry of Defense
will be slashed 48%, with the remaining capital expenditure funds
dedicated to a military academy project. The few ministries with
increases to capital expenditure budgets were the Ministry of Energy
and Mineral Resources, whose expenditures are related to Jordan's
nuclear energy project, and the Ministry of Transportation, which
had a revenue influx, in part to cover the costs of land acquisition
for a rail line between Amman and Zarqa, an industrial town 15
kilometers northeast of the capital (ref D).

Making Ends Meet
--------------


4. (SBU) Zeroing in on the budgets for certain GOJ entities gives a
better picture of how the 2010 budget will impact GOJ operations.
Starting at the top, even the Royal Court will see 18% cuts in its
budget, including cuts to salaries by $10 million, capital
expenditures set at $0, equipment purchases cut from $1.4 million to
$46,000, a phone and communications budget cut from $1.8 million in
2009 to $170,000, and a decrease in the fuel budget from $2.5
million to $170,000.


5. (SBU) The Ministry of the Environment (MOE) has been hit with a

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35% cut in its capital expenditure budget. Because of the cuts, the
MOE will increase its focus on public-private-partnerships (PPP) to
carry out some of its critical programs. For example, Jordan's
National Agenda calls for a medical and hazardous waste program.
The GOJ was intending to carry out the project independently, but is
instead moving the plan forward as a PPP with a $42 million
investment. The MOE is also a focal point for 19 treaties and its
officials therefore must conduct official travel. The Prime
Ministry has been accommodating, but MOE is trimming the size of its
delegations and traveling at the expense of others whenever
possible. Foreign Ministry officials commented that whenever
possible, diplomats from Jordanian embassies will attend events in
host or nearby countries, cutting traveling expenses but also
limiting technical expertise.

Less Travel, Fewer New Hires
--------------


6. (SBU) The Jordan Institution for Standards and Metrology (JISM),
Jordan's standards and safety regulatory agency and a key GOJ
interlocutor on Intellectual Property Rights issues, complained to
EmbOffs that the amounts slashed from travel budgets were arbitrary
and that JISM will not be able to attend many of the conferences and
meetings in which it usually participates. JISM is in the process
of prioritizing its travel requirements, focusing first on events of
those international bodies where JISM plays a leadership role.


7. (SBU) The leadership of the Jordan Investment Board (JIB) told
EconOffs that the cuts have not had a great impact on its travel
budget because much of JIB's travel is in advance of or along with
the King's travel and thus covered by the Royal Court. Like JISM
and other agencies, however, there are no plans to hire new staff
despite Jordan's need and desire to further promote foreign
investment in Jordan.


8. (SBU) The Jordan Food and Drug Administration (JFDA) asserted to
EconOffs that the cuts have impacted not only their travel budget,
but also plans for expansion. The JFDA wanted to open a Zarqa
office since most of Jordan's packaged food is manufactured there.
Those plans are now on hold. Inspections will also be affected by
the cuts and JFDA has had to prioritize training options.


9. (SBU) Contacts at Jordan's Ministry of Industry and Trade
explained to EconOffs that most of its travel is not for conferences
and seminars, but rather for bilateral or multilateral trade talks
and as a result will not take significant cuts. They told EconOffs
that MOIT will, however, cut overtime by 30% by curtailing Saturday
work to keep the Ministry dark an extra day of the week, an
energy-saving measure that should save the Ministry 15% in
electrical use, preserving both the environment and the Ministry's
budget.

Impacts of the Cuts on the USG
--------------


10. (SBU) Comment: In the 2010 budget, current expenditures, which
cover salaries and pensions for civilian and military employees, are
already at $6.4 billion and account for 83% of expenses. The budget
cuts leave little room for new hiring, and any new hiring that does
take place would further increase the deficit. Further reason for
concern is that Jordan's 2010 revenues are expected to be lower
compared to 2009 revenues, because 2009 saw an actual increase in
income and sales tax revenue based on strong growth in 2008 (ref B).
Weak growth in 2009 will translate to lower income and sales tax
revenues this year (taxes on 2009 income will be paid in 2010).
This along with a continued downward trend for the collection of
land sales and other fees by the GOJ in 2010 portends an even more
precarious budget situation during the second half of 2010.


11. (SBU) Comment continued: These budget issues will certainly
create new policy considerations for the USG in the year ahead.

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Post anticipates even more requests from the GOJ for financial and
technical assistance. The budget crunch will likely become an
obstacle or cause for delays in key reform and development projects
of interest to the U.S., particularly for those that require the
hiring of additional Jordanian staff or new construction at GOJ
expense. As examples, implementation of the Megaports Initiative,
standing up an independent and robust Anti-Money Laundering Unit,
and increasing labor inspectors under the Ministry of Labor all
require new staff positions and might be impacted, although GOJ
interlocutors assert these particular programs will be able to
secure funding and that shifting personnel within ministries or
between them is also an option. End comment.

BEECROFT