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AMMAN, April 19 (Reuters) – Jordan will postpone until the end of the year public sector wage increases planned in the country’s 2020 budget to ease financial pressures from the coronavirus crisis, its official official said on Sunday. Minister of Finances.
Mohammad Al Ississ told Al Mamlaka TV the move was among tax measures taken after the crisis derailed the $9.8 billion ($14 billion) 2020 budget, which included some of the biggest hikes salaries for civil servants and military personnel for years.
The government was expected to save at least half a billion dinars ($700 million) on salaries and pensions, which make up the bulk of state spending in the 2020 budget, officials said.
“We face tough choices,” Al Ississ said in an earlier statement in which he assured state employees they would be paid on time, in an apparent attempt to allay growing public fears that the financial crisis delays some government payments.
Al Ississ, however, denied that the government was considering a budget revision to meet the extra spending needs of millions of dinars in extra social spending to protect the country’s poor whose incomes have suffered.
The Jordanian government initially implemented the increases, which covered 700,000 state employees, including army personnel, despite the decision to increase spending at a time of rising public debt in order to avoid social instability, officials said.
The kingdom has the highest public spending relative to the size of its economy and the government’s expansionary budget for 2020 has been seen by economists as giving in to populist demands, at the expense of fiscal prudence.
Over the past two decades, the public sector has grown rapidly as successive governments have sought to appease citizens with public jobs to maintain stability.
Rampant spending has contributed to a skyrocketing public debt of $41 billion, or 97% of gross domestic product that Jordan is struggling to control.
The IMF, which had backed Jordan’s growth-boosting measures to reduce debt, last month agreed to a new four-year, $1.3 billion structural reform package.
Al Ississ said he was optimistic that the IMF deal would pave the way for additional aid from major Western and Arab donors to the country.
Officials say the crisis following a strict lockdown to stem the coronavirus outbreak has led to a sharp decline in economic activity that will lower growth projections and deepen an economic slowdown in the debt-dependent economy.
Despite the strain on public finances, Al Ississ said the kingdom was committed to paying its local and foreign debts, including bond maturities, on time.
“Serving our debt is a priority and we have plans to address it and we are working all the time to make sure how we pay and by what mechanism,” he said. Officials say the crisis has made it unlikely that the country will meet this year’s deficit target of 2.3% of GDP or maintain an IMF growth forecast of 2.1% for 2020. (Report by Suleiman Al -Khalidi; edited by Alexander Smith and Daniel Wallis)