Government Report Cites Increase in Spending

By Fuad al-Qadi

An economic report issued by the government revealed that the year of 2010 witnessed a general increases in utilization the state’s public funds. The report attributed the increase of spending to several causes, including the rise in interest payments oo domestic public debt and increased support costs on oil derivatives, as well as the costs of security operations to counter acts of sabotage and terrorism.

The increase in public expenditure comes amid the general scarcity of natural resources, and so exacerbates the budget deficit while the government resorts to funding its operations partially from inflationary sources.

It led to many negative effects on the most important indicators of macroeconomic stability, including increased pressure on the balance of payments and the accelerated loss of foreign exchange reserves.

As well as the deterioration of the exchange rate on the national currency and the high rates of inflation, low levels of standards of living and the increase of interest payments on domestic public debt.

In light of these developments, the government tried to restore the state of economic and financial stability and worked on controlling public spending, especially unessential expenditure, and its role in the gradual lifting of the support of oil derivatives.

The government adopted a program of financial reform and monetary cooperation with the International Monetary Fund from the middle of 2010. The future policies will focus on the restrictions of wages and salaries of the civil service, which contain the current expenditures, while allowing an increase of capital and social expenditure and reforming the price distortions. In light of this, it is expected to contain the total in-use to reduce its share from 28.2% of GDP in 2010 to 25.3% in 2012.

The estimate is consistent with ensuring the absolute increase in the total of expenditures with the increase in total general resources, and will not be detrimental to the public budget deficit. The report expected the return the budget deficit to safe levels, as part of a decrease from -6.9% of GDP in 2010 to less than 3% of GDP in 2012, to reduce the rivalry of private investments and allow more chances for private sectors participation in economic development.

This will be the basic orientation in the budget deficit in the reliance on real sources in financing the budget deficit, through the rationalization of issuing bills and bonds of public debt during the medium and long-term in the open market.

There are efforts underway to investigate at the possibility of issuing Islamic bonds geared toward financing the reduction of the deficit and which would serve the public budget for economic growth and the establishment of the stock market.

The report said that the most important general policies and procedures that can be adopted to confront the future challenges that threaten the sustainability of public finances is to maintain the budget deficit at a safe level and to continue financing the deficit of non-inflationary sources.

It also recommended reducing dependence on oil and gas revenues, raising the efficiency of collecting tax revenues, and updating the mechanisms for the application of tax laws.

In addition to collecting more loans, foreign aid and raising the efficiency of allocation and utilization, as well as developing public financial management to enhance transparency and accountability and to ensure optimal allocation of resources.

The report confirmed that the government, under the current budget, is focusing on measures to expand investment, prioritizing investment spending , increasing the funding for strategic projects with the  focus on raising spending on infrastructure, basic services, as well as maintenance and operation of capital assets

Raising the efficiency of public expenditure and activating the regulatory tools to ensure periodic evaluations of the various outlays and to identify problems in implementation were also stated goals of the government in the coming months.