Jordan postpones public sector wage hikes to ease financial pressure

[AMMAN] Jordan will delay public sector pay increases earmarked in the country's 2020 budget until the end of the year to ease financial pressures from the coronavirus crisis, its finance minister said on Sunday.

Mohammad Al Ississ told Al Mamlaka television that the move was part of fiscal measures taken after the crisis derailed the 9.8 billion (S$20 billion) 2020 budget, which included some of the biggest salary hikes for civil servants and military personnel in years.

The government was expected to save at least half a billion dinars (S$996.2 million) on salaries and pensions, which make up the bulk of state expenditure in the 2020 budget, officials say.

"We are facing difficult choices," Mr Al Ississ said in an earlier statement in which he assured state employees they would be paid on time, in an apparent move to quell mounting public fears the financial squeeze could delay some state payments.

Mr Al Ississ, however, denied that the government was considering a revision of the budget to accommodate extra spending needs for millions of dinars of extra social spending to cushion the country's poor whose income has suffered.

Jordan's government had originally implemented the rises, which covered 700,000 state employees including army personnel, despite the move increasing spending at a time of rising public debt in order to stave off social instability, officials said.

The kingdom has among the highest government spending relative to the size of its economy and the government's expansionist 2020 budget was seen by economists as caving in to populist demands, at the expense of fiscal prudence.

The public sector has over the last two decades expanded rapidly as successive governments sought to appease citizens with state jobs to maintain stability.

The runaway spending contributed to a soaring US$41 billion public debt, equivalent to 97 per cent of gross domestic product which Jordan has been struggling to rein.

The IMF, which had supported Jordan's moves to spur growth to eventually bring down the debt, agreed last month to a new four-year US$1.3 billon programme of structural reforms.

Mr Al Ississ said he was optimistic the IMF deal would pave the way for extra aid by the country's main Western and Arab donors.

Officials say the crisis which has followed a tight lockdown to stem the coronavirus outbreak has led to a steep fall in economic activity that will slash growth projections and deepen an economic downturn in the debt-dependent economy.

Despite the strain on government finances, Mr Al Ississ said the kingdom was committed to paying its local and foreign debt payments, including bond maturities on time.

"Servicing our debt is a priority and we have plans to deal with this and we working all the time to ensure how we pay and under which mechanism," he said.

Officials say the crisis has made it unlikely the country would meet this year's deficit target of 2.3 per cent of GDP nor maintain an IMF growth forecast of 2.1 per cent for 2020.

REUTERS