Cairo Amman Bank Flash Comment: Budget Deficit Narrowed In The First Half Of 2015, While Public Debt Continued Increased

The Ministry of Finance released government budget figures for June 2015, which showed that the central government fiscal deficit narrowed in the first half of the year compared to the same period last year:  

• The budget balance improved in the half of 2015 compared to the same time period of 2014, with a deficit of JD 223 million compared to last year’s deficit of JD 354 million. The JD 131 million improvement in the budget balance was a result of a JD 75 million decrease in total expenditures, coupled with a JD 56 million increase in total revenues and grants.  
• Total revenues and grants increased by around JD 56 million in the first half of 2015, as domestic revenues increased by JD 53 million and foreign grants increased by JD 3 million for the same period. The increase in domestic revenue was mainly a result of an increase in tax revenues which offset a decline in other revenues especially property income.
• The moderate JD 3 million increase in foreign grants compared to the same time period in the previous year, indicates a sluggish increase in foreign grants for the first half of this year. However, grants are usually committed towards the latter part of the year, and we expect this figure to increase in the coming months.
• Total expenditures decreased by around JD 75 million for the same period, due to a JD 71 million decrease in current expenditures and a decrease of JD 3 million in capital expenditures.
• Meanwhile, the fiscal balance before grants resulted in a budget deficit of JD 518 million during the first half of 2015, compared to a budget deficit of JD 645 million during the same period of last year; a drop of around JD 127 million, so far in line with budget expectations.
• Furthermore, net public debt reached around JD 21,387 million in June 2015, around 78.8% of 2015 estimated GDP according to the Ministry of Finance’s calculations, increasing by  around JD 832 million in the first half of the year. The rise in public debt is due to the increase in guaranteed loans for both NEPCO and water authority during the first half of this year.  
• Domestic debt fell by 228 million, while external debt increased by around  JD 1,060 million for the same period. The rise in outstanding external public debt is due to issuing Euro Bonds guaranteed by the United States of America in value of US 1.5 Billion at the end of June.

• It is noteworthy that gross public debt reached around JD 23.6 billion in June, around 87.0% of GDP, increasing by around JD 598 million in the first half of the year due to an increase in outstanding debt of own-budget agencies.