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Revenues, expenditure on the high side

Mar 19,2017 - Last updated at Mar 19,2017

When the Ministry of Finance submitted its draft budget for 2017 to Parliament, the final figures for 2016 were not ready yet.

For comparison, the ministry used estimates for 2016 to judge the reasonableness of the new budget figures, comparing them to the estimated figures of the previous year. This practice is used every year.

Since the actual figures for the budget performance in 2016 are now available, the comparison of budget figures can be made with the actual figures.

In this case, we will come up with a set of percentages that are different from those used previously to pass judgement on the new budget.

The first observation is that, according to the budget, domestic revenue in 2017 must rise by 17.8 per cent and not 16 per cent, as was thought by comparisons made with estimated figures.

Even if we exclude the extra amount of JD450 million, the domestic revenues of the new budget will remain 10.6 per cent higher than the actual domestic revenues of 2016.

This is obviously a high percentage. It is higher than the economic growth rate and inflation rate combined, as expected in 2017.

This means that the Ministry of Finance will have to depend on other ways and means to achieve more revenues, such as improving its efficiency in imposing and collecting taxes and fighting tax evasion.

Foreign grants, on the other hand, are becoming increasingly sensitive and uncertain, first because the five-year period agreed with Gulf states has expired, second because Gulf states witness financial difficulties due to low prices of petroleum and third because of the political shifts to the right in America and Europe, and the uncertainty that goes with it.

In this respect, the budget estimates of grants in 2017 are rather conservative and rightly so.

Grants in 2017 were estimated to be 13.4 per cent lower than those estimated for 2016. However, they turned out to be only 7.2 per cent lower than the actual receipts of 2016.

The budget expected current expenditure in 2017 to rise by 6.6 per cent over the previous year. It turned out to be 10.4 per cent higher than the actual expenditure of 2016.

This is a big growth in current expenditure allowed by the budget at a time when the government is trying to control expenditure in order to reduce the budget deficit.

Amounts used by the budget are supposed to be binding on the government, because the budget is issued as a law. However, in practice, the expenditure amounts specified in the budget represent a ceiling that should not be exceeded; on the contrary, it is desirable and should be quite possible to save part of it.

Amounts which appear in the budget as revenue are only a rough estimate. No question will be asked if the actual revenues are higher or lower than the targeted figure.

 

Of course, an excess of revenues is welcome and taken as evidence that the fiscal management is active and successful, while a shortage indicates the failure of the management to extract what is due to the Treasury.

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