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    03-Dec-2022

Gov’t fails to pay tens of millions to private sector companies

 

Jordan News

 

AMMAN — Private sector companies are complaining that the government is failing to meet its financial obligations, which is creating cash flow problems for most of them and driving others to the brink of bankruptcy, according to Al-Ghad’s Salameh Al-Darawi. 
 
Business columnist Darawi said that the government is accumulating millions of dinars in debts owed to the private sector. According to him, the government of former premier Hani Mulki had adopted a three-year plan to settle debts owed to the private sector, starting with a JD124 million down payment.
 
The process continued during the Omar Razzaz government, financed through internal borrowing, but was suspended when the Kingdom adopted austerity measures to tackle the COVID-19 pandemic.
 
As things stand today, Darawi said, the Jordan Petroleum Refinery Company is the largest private sector creditor to the government, with claims exceeding JD395 million. The debt is expected to exceed JD400 million by the end of the year as the company is about to launch one of the largest investment projects in the Kingdom, which is the fourth expansion project of the refinery, with a price tag of about $2.6 billion.
 
“These arrears have resulted in a negative financial position of the company vis-à-vis financing agencies, and gives an unrealistic and incorrect picture of the company’s financial situation,” Darawi said.
 
“Financers need to know every detail about the company’s situation and this matter requires a clear position from the Ministry of Finance, which should clarify the truth about these claims and set a timetable for settling such debts,” he added.
 
Pharmaceutical companies that supply public sector hospitals are calling on the government to settle more than JD370 million it owes them. Some of these debts are long overdue, and have stopped some companies from entering government drug bids, while demanding payment of previous dues.
 
“The government’s delay in reimbursing the pharmaceutical companies puts these companies under great financial distress and limits their ability to supply the local market with essential medicines, which explains the shortages of medicines in some health centers and hospitals affiliated with the Ministry of Health,” Darawi said.
 
He added that some of these companies have incurred great losses by doing business with the government, that their financial situation is very worrying, and that this puts in doubt their ability to survive as the government continues to turn a blind eye to their claims.
 
Another institution that is under financial stress is the King Hussein Cancer Center (KHCC), Darawi said.
 
“This is another institution whose financial claims the government has failed to settle; the dues result from exemptions the government grants Jordanian patients,” he said.
 
According to him, government debts to the KHCC now exceed JD220 million, which puts the center in a very difficult financial situation and affects its ability to provide services.
 
“The University of Jordan Hospital is also calling on the government to settle a JD100 million debt,” he said, adding that the same applies to dozens of companies doing business with the government, including those in the contracting, media, industrial, and land development sectors. He estimates money owed to these companies to be in the hundreds of millions of dinars.
 
These arrears are weakening these companies, or limit their ability to grow and invest, Darawi said.
 
Some find themselves in “a dark financial tunnel” as a result of accumulated losses and a lack of liquidity, which may push them to restructure their businesses and lay off workers, or cancel expansion plans, he added.
 
The government’s delay in paying private sector companies means that the budget deficit figures are not accurate, because these claims are not included in its estimates; if they were, then the deficit would be bigger, Darawi said, asking the Finance Ministry to include these arrears in the 2023 budget bill’s financial allocations, to reflect clearly the figures.
 
According to Darawi, the government needs to intervene to address these imbalances.
 
“After the fifth review by the International Monetary Fund and the improvement of the Kingdom’s credit rating, the government’s ability to borrow is much better than before, and here lies the solution to settle these arrears once and for all,” he said. 
 
Doing so will reflect positively on the private sector, which will also help the economy, benefit the Treasury, create jobs and boost exports, he said.
 
 

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