VZCZCXRO6057
RR RUEHDE
DE RUEHAM #2408/01 3061016
ZNY CCCCC ZZH
R 021016Z NOV 09
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC 6214
INFO RUEHAD/AMEMBASSY ABU DHABI 1355
RUEHGB/AMEMBASSY BAGHDAD 6310
RUEHEG/AMEMBASSY CAIRO 4174
RUEHDM/AMEMBASSY DAMASCUS 4268
RUEHRH/AMEMBASSY RIYADH 2229
RUEHTV/AMEMBASSY TEL AVIV 1914
RUEHDE/AMCONSUL DUBAI 0500
RUEHJI/AMCONSUL JEDDAH 0921
RUEHJM/AMCONSUL JERUSALEM 5685
RUEATRS/DEPT OF TREASURY WASHDC

C O N F I D E N T I A L SECTION 01 OF 02 AMMAN 002408 
 
SIPDIS 
 
STATE FOR NEA/ELA, EEB 
 
E.O. 12958: DECL: 10/29/2019 
TAGS: EFIN ECON EAID PGOV JO
SUBJECT: LOW REVENUES, LACK OF GRANTS MEAN DEEP CUTS FOR 
JORDAN'S PROPOSED 2010 BUDGET 
 
REF: A. AMMAN 2064 
     ¶B. AMMAN 1932 
     ¶C. AMMAN 1646 
     ¶D. 08 AMMAN 2982 
 
Classified By: Ambassador R. Stephen Beecroft for Reasons 1.4 (b) and ( 
d) 
 
¶1. (C) Summary:  Jordan's Ministry of Finance (MOF) has 
circulated to government ministries a draft budget for 2010 
that proposes 11.3% cuts compared to the 2009 budget.  The 
proposed $7.71 billion budget is based on an expected real 
growth rate of 4.5% for 2010 and on a $967.79 million 
projected deficit.  To address its budget constraints, the 
MOF told EconOffs that the government will freeze new capital 
expenditure projects in 2010.  The proposed 2010 budget comes 
on the heels of a tough budgetary year in 2009, where the 
deficit through nine months has reached $1.24 billion, 
already far eclipsing the expected $975 million budget 
deficit projected for the year.  Jordan has also been hit by 
a significant 79% decline in foreign grants in 2009 and the 
MOF has similar concerns about foreign grants for 2010.  The 
MOF expects the cabinet to approve the draft 2010 budget in 
mid-November for submission to Parliament.  End summary. 
 
2010 Budget Cut 11.3% 
--------------------- 
 
¶2. (C) Dr. Ismail Zaghloul, Director General of the Budget 
Department of the Ministry of Finance (MOF) told EconOffs on 
October 27 that a 2010 draft budget proposal has been 
submitted to government ministries as the MOF prepares to 
finalize the 2010 budget.  The proposed $7.71 billion 2010 
budget foresees 11.3% in across the board cuts when compared 
to 2009's $8.69 billion budget.  The 2010 budget discussion 
is taking place as Jordan's 2009 budget deficit continues to 
grow, reaching $1.24 billion after the first nine months of 
2009 and eclipsing the $493.36 million deficit for the same 
period in 2008.  The budget deficit for all of 2009 is now 
expected to reach about $1.67 billion.  The vast increase in 
the 2009 deficit is attributed to slower than projected 
growth, an increase in 2009 capital expenditures, and 
dwindling foreign aid, with virtually nothing from 
historically large donors Saudi Arabia and the UAE (ref C). 
 
¶3. (C) This year, foreign grants over the first nine months 
reached $145.10 million, a 79% drop from the $696.52 million 
in grants over the same period in 2008.  The proposed 2010 
budget envisions a $967.79 million deficit that would reach 
about 7.3% of GDP and is an amount slightly lower than the 
targeted 2009 deficit of $975 million (ref D). The budget is 
also based on a 2010 projected real growth rate of 4.5% (the 
real growth rate in 2009 is at 3% and in 2008 it reached 
7.9%). 
 
Cutting Government Spending 
--------------------------- 
 
¶4. (C) Zaghloul asserted that many of the ministries within 
the government were not satisfied with the budget ceilings 
proposed to them through the budget circular now making its 
way through the ministries.  The Ministry of Planning and 
International Cooperation and the Ministry of Public Works 
and Housing have pushed back, including publicly, claiming 
that the budget cuts would leave their ministries with 
insufficient funds to carry out major work plans. 
Separately, MOF Secretary General Izzeddin Kanakrieh reported 
that ministries are being encouraged to work together.  If a 
ministry has resources another could use or could delay a 
project, such as a road repair, and free up funds for health 
or education, there would be no obstacles to transferring 
cash or equipment.  Kanakrieh and Zaghloul further asserted 
that the MOF's options are limited, as about 87% of annual 
budget expenditures are tied up in salaries, pensions and 
social welfare programs and by law, the deficit is limited to 
60% of GDP.  Zaghloul stressed that to meet 2010 budget 
expectations, the Government of Jordan (GOJ) will at least: 
freeze hiring in all ministries except for the Ministries of 
Health and Education; curb official travel; freeze purchases 
of new official vehicles and furniture; and not undertake any 
 
AMMAN 00002408  002 OF 002 
 
 
new capital projects.  The GOJ will also cut the budgets for 
some 57 independent units that report to the GOJ but are not 
under any of the ministries such as the National Electric 
Power Company, the Central Bank of Jordan and the Water 
Authority.  According to Zaghloul, these units, which were 
financed by $2.9 billion in the 2009 budget, will face cuts 
as deep as the ministries. 
 
¶5. (C) Comment:  The 2010 budget proposal reflects the GOJ's 
recognition of the harsh fiscal reality it is facing. 
Unresolved is whether the GOJ will be able to improve its 
budget planning for future budgets given its dependence and 
over-reliance on foreign grants, which might or might not 
materialize, and its overburdened non-discretional spending 
segment of the budget.  Zaghloul expects the MOF to forward 
the final budget proposal to the cabinet for approval in 
mid-November, after the ministries have reviewed their 
specific budgets under the budget ceilings imposed by the 
government.  After the cabinet approves the budget, the 
parliament would then take it up during its regular session 
set to begin on December 1.  End comment. 
 
Visit Amman's Classified Website at: 
http://diplopedia.state.sgov.gov/index.php?ti tle=Embassy Amman 
 
Beecroft