Gov’t likely to adopt direct cash in subsidy system

Finance Minister Umayya Toukan on Tuesday said government subsidies will likely be delivered to targeted segments through direct cash payments, the Jordan News Agency, Petra, reported.At a meeting with the Lower House Financial Committee, Toukan indicated that excluding the well-off from the blanket subsidy system will reduce the volume of financial allocations for subsidised basic commodities to JD450 million in 2012 state budget from JD720 million in 2011. Commenting on the mechanism of using smart cards to deliver subsidies to eligible citizens, the minister said that this method is used in different countries, such as Iran and Finland, but it has proved unfeasible due to forgery, adding the government is leaning towards cash transfers instead.He explained that the ministry is preparing accurate lists of targeted households to ensure that subsidies benefit only the low- and medium-income Jordanians, saying the new mechanism will remove the flaws in the previous subsidy system. “We are not asking low-income citizens to tighten their belts because the new measures target the well-off,” Toukan said, pointing out, however, that inflation rates may go up above the expected levels due to these measures.In regards to foreign assistance expected next year, the official indicated that the confirmed sum stated in the budget draft law of 2012 includes $1 billion from Gulf Cooperation Council countries and $180 million from the US and the European Union. Underlining that the volume of public spending in next year’s budget remained at the same level of 2011, Toukan added that allocations for a restructuring plan for the salaries of public sector employees will be financed through cuts to current and operational spending as well as a 15 per cent reduction of capital expenditure.Toukan was pessimistic about economic recovery next year, attributing the expected slow growth in the gross domestic product (GDP), which is projected at 3 per cent in the draft budget, to domestic and regional conditions. Commenting on the planned slashing of capital spending next year, the finance minister explained that growth is not always generated by capital expenditure but also through enhancing productivity and management efficiency, noting that the funding will only go to finance existing projects under construction.Toukan pointed out that a former government violated the public debt law by exceeding the ceiling of 60 per cent ratio to the GDP, stating that public debts currently are around 65 per cent of the GDP.He attributed the widening rate of public debt to the fiscal deficit in 2011, which was caused mainly by rising commodity prices and irregular supply of natural gas from Egypt.Pledging to resign in case there are wrong or hidden figures in 2012 budget, he accused previous governments of “glamourising” the fiscal situation to look brighter than what it really was, charging that the “inaccurate figures put Kingdom’s economy in a dilemma”.