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DUBAI — Plunging oil prices could mean the first budget cuts for major exporter Saudi Arabia since 2002 but they are not expected to be large enough to stop growth in the Arab world's biggest economy.

The government gets about 90 per cent of its revenue from oil exports and is believed to need an average oil price above $90 to balance its budget this year.

But Brent crude fell to $67 a barrel this week from $115 in June and if current prices are sustained, the budget plan for next year, expected late this month, will produce a deficit for the first time since 2009.

"There is no way for Saudi authorities to announce a bigger budget in 2015 than what they announced for 2014," said John Sfakianakis, a former adviser to the Saudi finance ministry who is now regional director of asset manager Ashmore in Riyadh.

"Unavoidably they will have to scale down the budget. [But] I do not expect the budget to be hugely lower," he added.

As recently as last month, the International Monetary Fund (IMF) predicted Saudi Arabia would enjoy a fiscal surplus of 1.6 per cent of gross domestic product (GDP) in 2015; now, private economists are talking of a deficit of over 1 per cent.

But businessmen and economists do not expect big cuts in state spending because the government has built huge fiscal reserves to cover any deficit and its ultra-low debt levels would allow it to borrow easily if needed.

This means the economy, which grew an annual 3.8 per cent in the second quarter, should continue to expand and major infrastructure projects, such as the $22.5 billion plan to build a metro rail system in Riyadh by 2019, should not be at risk.

Some analysts believe Saudi Arabia is content to see oil prices fall as a way to squeeze out competing shale oil producers in the United States, confident it has enough reserves to ride out a period of cheap oil.

Budget plan

Even before oil started falling in June, Saudi Arabia was curbing spending growth after several years of spectacular increases following the global financial crisis and the 2011 Arab Spring uprisings.

The current year's budget plan envisages expenditure of 855 billion riyals ($227.8 billion), a mere 4.3 per cent rise from the 2013 plan and the slowest increase in a decade.

Top Saudi officials have been coy about their 2015 plans.

"The global oil situation usually in one way or another affects countries' revenues and debts, but the kingdom has always been keen on building its budgets on estimates that take all possibilities into consideration," Finance Minister Ibrahim Alassaf told a local newspaper last month.

The government usually ends up spending substantially more than its budget plan, overspending by an annual average of 25 per cent in 2004-2013. So the 2015 plan could quickly change if oil prices rebound.

It seems clear, however, that the government will not be under pressure to reduce spending sharply.

Government reserves at the central bank totalled 905 billion riyals at the end of October, enough to cover an annual budget deficit of 3 per cent of GDP for about 10 years. That excludes the government's other assets and its ability to borrow.

Also, Saudi Arabia funds some of its large infrastructure projects, such as housing and transportation, off-budget from a separate central bank account established to insulate them from budget fluctuations, economists said. That account contained 514 billion riyals in October.

Any drop in budget spending of, for example, 1 or 2 per cent would slow economic growth but probably not dramatically, because the non-oil private sector has been booming. The sector's annual growth edged up to 4.7 per cent in April-June.

Foreign aid

Economists believe Saudi Arabia will be reluctant to cut spending on areas such as social welfare and housing because it views them as key to political stability. Similarly, its infrastructure projects aim to ensure long-term economic stability by diversifying the economy.

But the foreign aid budget could see cuts. Riyadh pledged $22.7 billion to its geopolitical allies between January 2011 and April 2014, disbursing $10.9 billion, mostly to Egypt, the IMF has said.

"We think that the financial aid will be the first to be cut if we see a further decline in oil prices," said Fahad Al Turki, head of research at Jadwa Investment in Riyadh.

Reducing domestic energy price subsidies, which cost the government tens of billions of dollars every year, could also bring savings. As oil has dropped, Kuwait, Oman and Abu Dhabi have taken steps towards cutting subsidies.

However, economists say the Saudi government may still shy away from this reform.

"I do not think the current oil prices being low for only a few months will create credible pressure that will trigger any change in the subsidy policy. There needs to be a longer horizon for that to happen," Alturki said.

AMMAN — Finance Minister Umayya Toukan on Tuesday said a delegation from the International Monetary Fund (IMF) will pay the Kingdom a regular visit next week to follow up on financial and economic reform programmes.

Toukan added that the team will discuss recent financial and economic developments that affect the national economy, especially after the IMF executive board agreed to conclude the fifth revision to the national reform programme.

He noted that the IMF may finish the revision programme by February 2015. The minister said Jordan’s commitment to apply the financial and economic reform programme has a great impact on improving the financial performance and stability of the Jordanian economy. 

AMMAN –  Jordan's real estate trading is continuing unabated due to a steady surge in property sales, official data showed Tuesday. 

According to national statistics, the trading boom is driven by higher spending on properties by Jordanians, who purchased apartments and land plots worth over JD6.6 billion so far this year.

The value of purchases made by non-Jordanian investors was only JD454.8 million in the first 11 months of this year. 

A report, issued by the Department of Land and Survey (DLS), showed that trading in the Kingdom's real estate market reached over JD7 billion in the first 11 months of this year,  up by JD1.2 billion or 21 per cent over the JD5.8 billion registered in the same period of 2013. 

The rise in trading boosted DLS revenues during January-November 2014 by over JD60 million to reach JD387 million compared to JD325 million during the same period of the year before. 

The DLS attributed the positive performance of the property market to a surge in home sales which, according to the report, grew by 17 per cent, while growth in land sales slowed down of the same percentage as last year. 

The data showed that a total of 32,768 housing units were sold in the first 11 months of this year, compared to 27,925 residential apartments sold during the same period of 2013.

Jordanians bought nearly 90 per cent of the apartments as non-Jordanians purchased only 3,270 residential units in the first 11 months of the year,  the report indicated, estimating the value of the apartments sold to non-Jordanians at JD287 million. They spent JD167 million on lands.  

The higher trading in the property market is in line with expectations of industry leaders. 

Jordan Housing Developers Association President Kamal Awamleh previously expected trading in the real estate  market to exceed JD7 billion this year due to population growth and the desire of the majority of Jordanians to purchase homes rather than pay rent.

"Our forecast for trading this year was JD7 billion, but now we expect it to easily exceed JD7.5 billion," Awamleh told The Jordan Times in previous interview.

AMMAN — A bonanza is in store for the banking industry in Jordan after the dust settles in Iraq and Syria, according to a top banker.

Jim Cowles, Citi's chief executive officer (CEO) for Europe, Middle East & Africa (EMEA), told The Jordan Times in a interview last week that banks were getting stronger in the Middle East, despite the challenging environment, and Jordan is “well positioned to be a financial hub in the area”.

He expects an eventual economic boom, especially in Iraq, which will translate into a thriving business for the financial sector in Jordan. Proof of that is the fact that Citi opened a Baghdad representative office in June last year .

The CEO was upbeat about the bank's operations in the local market and praised the Kingdom’s economic and financial performance over the years.

He also lauded the Kingdom's stability and sound policies, and recommended that authorities keep up the drive to intensify job creation and ensure sustainable stability.

"Jordan is mature, disciplined, stable and professional," said the banker, adding that its policies are sound and institutions solid.

The presence of Citi in Amman since 1974 is a validation and testament to that standing, according to the banker who was in Jordan to celebrate the 40th anniversary of Citi Amman.

Cowles said by participating as the largest underwriter and lead manager for Jordan's recent flotations of $2.23 billion sovereign bonds in international markets, Citi attested to Jordan's safety and prudent financial management.

Through such participation, Citi helps promote Jordan's stability and security for global investment considerations; the bank has an edge by virtue of having long experience and having gained good knowledge of the Kingdom during 40 years of operations.

Besides the sovereign bonds, Citi has been corporate broker to Hikma Pharmaceuticals since its initial public offering in 2005 and, in 2014, Citi acted as financial adviser to the corporation in its agreement to acquire substantially all the assets comprising Bedford Laboratories from Ben Venue Laboratories. 

Mayank Malik, CEO for Jordan and Iraq, said Citi Amman is now adding mid-size firms to its list of corporate clients because this sector has the potential to grow locally and outside Jordan and, as such, fits well in the bank's expansion strategy.

Another area where Citibank Jordan Branch  is active through Citi Foundation, Malik said, is with non-governmental organisations such as Amideast’s Arab Women's  Entrepreneurship Project, the Jordan River Foundation, The Arab Foundation for Sustainable Development and Tamweelcom, in order to help raise awareness among marginalised communities about banking and financial management, besides extending funds to bolster the microfinance industry.

In this context, Malik underlined the role of women who are supported by the bank to become active entrepreneurs due to their perseverance.

Cowles said that Citibank targets institutional business and that despite the challenging conditions in 12 Middle East and North Africa (MENA) countries, the bank remains committed to its operations.

"We are staying the course," he stressed, noting that the Citi's MENA operations are growing and profitable, especially in Dubai, where business is on the rise.

The EMEA CEO indicated that the bank only operates retail business in seven markets out of 55 in the EMEA region.

Worldwide, Cowles said banking activities in the current phase are transitional, following the international financial crisis.

He said the global banking industry is now adjusting to stricter regulatory controls that limit the amount of leverage for banking operations, a process he sees as positive.

Cowles added that the methodology now is discipline and delivering value, with a focus on governance, compliance and enhanced regulations.

In this context, the bank’s restructuring over the past five to six years lowered its balance sheet to $1.9 trillion from $3 trillion, Cowles said, stressing the importance of redeployment of resources and maintaining a competitive advantage.

He highlighted globality as Citi's key area of strength, besides the bank's keenness to offer high-quality services to clients and to invest in innovation, noting that Citi was the bank which invented the ATMs (automated teller machines) and the first to introduce electronic banking to Jordan.

AMMAN — The Jordanian Indian Fertilisers Company (JIFCO) on Monday announced the start of the operational phase at its industrial zone in Shidiyeh, which was established at a cost of $860 million.

The zone includes two factories: one to produce phosphoric acid and the other to manufacture sulfuric acid, in addition to other facilities. 

JIFCO Chairman Amer Majali said the project was funded by the European Investment Bank and an agency affiliated with the International Monetary Fund.

He noted that around 500,000 metric tonnes of phosphoric acid are expected to be produced at the zone and to be exported  to other countries, namely India, with revenues projected to reach $325 million. A total of 300 Jordanians are working at the zone.  

LONDON — Brent crude oil fell on Monday to a five-year low below $68 before recovering most of the losses as investors looked for a price floor after last week's decision by the Organisation of the Petroleum Exporting Countries (OPEC) not to cut production.

US crude and Brent have fallen for five months in a row, oil's longest losing streak since the 2008 financial crisis.

"The market is still very much in panic mode," said Energy Aspects' chief oil analyst Amrita Sen. "Once we get over the panic, Brent prices will probably stabilise at around $65-80 a barrel in the short term."

Brent hit a low of $67.53 a barrel, the lowest since October 2009, and was down 7 cents at $70.07 a barrel by 1347 GMT. US crude was up 19 cents at $66.34 a barrel, having slipped to an intraday low of $63.72, the lowest since July 2009.

Saudi Arabia, OPEC's most influential member blocked moves by some smaller producers to curb oil output in response to huge oversupply in world markets.

Oil lost more than 12 per cent after OPEC's decision last Thursday.

Data suggested the new price environment has hit fast-growing US shale oil production, the main driver of global production growth in recent years, with a 15 per cent drop in permits for new wells in November.

"The market is still looking for a new equilibrium below $70 [a barrel], which is a little surprising given that, with the current prices, much of the shale oil production in the US, or part of it, will be unprofitable," Commerzbank analyst Eugen Weinberg said.

With oil prices down about 40 per cent since June, the impact is being felt around the world as oil producers from Iraq to Nigeria revise 2015 budgets to reflect lower prices.

Slower-than-expected growth in China's manufacturing sector may add further downward pressure on oil. China's official Purchasing Managers' Index (PMI) slipped to 50.3 in November, a government study showed on Monday, lower than analyst forecasts of 50.6.

"In the fourth quarter, oil markets have lost the support of both the invisible hand of the US Fed and OPEC," Petromatrix analyst Olivier Jakob said, referring to the Federal Reserve's move to phase out monetary stimulus for the US economy.

Separately said it was content with the group's's decision to maintain output despite a supply glut and plunging prices.

The council of ministers "expressed satisfaction at the decisions that reflected the cohesion and solidarity of the organisation", the official Saudi Press Agency (SPA) said.

The Cabinet was briefed on last Thursday's meeting of the 12-member OPEC in Vienna, it added.

The group which pumps one-third of global oil decided to keep production at 30 million barrels a day, sending US oil prices down more than $4 in Friday opening trades after the meeting, a selloff that continued when markets reopened on Monday.

OPEC's poorer members including Venezuela had sought a production cut to protect their revenues.

SPA said the Saudi Cabinet highlighted "that the kingdom pays attention to the stability of the international market, and that its policies are based on the short- and long-term economic interests of the kingdom".

It added that "cooperation by OPEC and non-OPEC producers is a joint responsibility" to achieve a stable market.

Analysts had said Riyadh was content to see American shale oil producers — and even some members of the group — suffer from low prices while it tries to hold on to market share in an increasingly competitive business.

Saudi Arabia is economically strong enough to withstand lower prices, the analysts said.

JOHANNESBURG — Barack Obama last year told a cheering crowd in Cape Town that a $7 billion plan to "Power Africa" would double electricity output on the world's poorest continent and bring "light where currently there is darkness".

A year later, the US president's flagship project for Africa has already achieved 25 per cent of its goal to deliver 10,000 megawatts of electricity and bring light to 20 million households and businesses, according to its annual report.

But the five-year plan has not yet delivered the power.

Power Africa has not measured its progress by counting actual megawatts added to the grid but promises of additional power made in deals it says it helped negotiate, according to sources inside the project and documents seen by Reuters.

Some projects facilitated by Power Africa, a programme operated by the US aid agency USAID, were under way years before the scheme's inception, others are still in the planning stage.

It is unclear how much of the $7 billion Obama pledged has actually been spent or if a further $20 billion in private sector investment commitments will materialise.

"Saying you've met targets on projects that might never happen or taking the credit for projects that have been worked on for years makes me uncomfortable," a source working on Power Africa told Reuters. "It's misleading."

Obama's pledge to double power generation in Africa within five years looked highly ambitious from the start. Per capita electricity output in Sub-Saharan Africa has been flat for three decades because most promised power plants never get built.

"We're dealing with megawatts on paper, rather than on the grid," a second source working on the project said. "Is that really what Obama promised?"

The first African-American US president, the son of a Kenyan father, Obama has often been criticised for a lukewarm engagement in Africa, consisting more of words than deeds.

‘We're like a pharmacist’

The 48 countries of Sub-Saharan Africa, with a combined population of 800 million, produce roughly the same amount of power as Spain, a country of just 46 million. This constrains Africa's growth and keeps hundreds of millions in poverty.

Power Africa coordinator Andrew Herscowitz told Reuters there had been some confusion about the role of the programme. He said it was always intended to "expedite transactions", facilitating private investment rather than handing out aid.

Herscowitz said Power Africa was there to help the private sector deliver electricity and it had already negotiated commitments from companies worth $20 billion, although he did not know how much of this money had been spent.

"We're like a pharmacist, where people come to us, we reach out to people and figure out what is needed," he said. "In some projects we may have a lot of involvement and in some we have very little involvement."

Foreign companies sign billions of dollars of agreements with African governments to build infrastructure every year, although a large number never get built.

In April 2011, the US Millennium Challenge Corp., a government aid agency involved in Power Africa, signed a $350 million deal to "revitalise" Malawi's power sector.

More than three years on, 1.7 per cent of that money has been spent, according to the programme's website, which gives no detail on progress on the ground.

Memoranda of understanding Power Africa signed this year with its six focus countries — Tanzania, Nigeria, Kenya, Ethiopia, Liberia and Ghana — contain less than $100 million of financial commitments targeted at specific countries, most of which is for consultants.

US consultancy Tetra Tech won a $64 million contract and former British Prime Minister Tony Blair's Africa Governance Initiative was given a $3 million deal.

As with many African aid projects, rights groups have criticised Power Africa as mostly being a vehicle to subsidise US companies.

Documents show $5 billion out of the $7 billion pledged is for loans for US exports from the government's Export-Import Bank (EXIM) and Overseas Private Investment Corp. (OPIC).

Turn on the lights

"It's absolutely not true. Power Africa is an opportunity to turn on the lights for millions of Africans by taking investment from all over the world," Herscowitz said.

Herscowitz rejected suggestions Power Africa merely tapped into existing projects, highlighting a 5 megawatt "NextGen" solar project in Tanzania and a 30 megawatt biomass scheme in Kenya which he said "didn't exist before Power Africa".

The NextGen project website, however, says a power purchase agreement for the solar project was signed in January 2013, six months before Power Africa was launched.

It is by no means guaranteed that the Power Africa programme, which has an initial five-year mandate, will continue or be seen as a priority when Obama's final term ends in two years, US government sources told Reuters.

In addition, the investment banks EXIM and OPIC are fighting for their survival in Congress, where Obama's Democratic Party was severely weakened in mid-term elections last month.

In a change of tack, the US government said in November it wants to partner with China on improving power in Africa.

Meanwhile, corruption in the countries that Power Africa operates in remains a problem.

Nigeria's state oil company was accused last year by the then central bank governor of withholding $20 billion in oil funds due to the government, while Tanzania's parliament is currently reviewing a report on graft in its energy sector.

AMMAN — A senior South African official on Sunday described Jordan as  an important gate to the Middle East and North Africa.

Zanele Sunni, chief director, and head of the Department of Trade and Industry delegation on South Africa’s trade and investment orientation, told The Jordan Times in an interview that South Africa is keen to bolster economic relations with Jordan through encouraging mutual investments in both countries.

Speaking on the sidelines of the first “South African Trade & Tourism Seminar, Exhibit and B2B Meeting” held in Amman on Sunday, Sunni said the volume of trade between the two countries is still modest and more need to be done to improve it.

Figures she presented showed South African exports to Jordan totaled $27 million in 2013, while imports from the Kingdom during the same year amounted to around $18 million.

Noting that the delegation was the first government mission on an exploratory tour  “because we are doing a Middle East round”, Sunni mentioned pharmaceuticals as a potential Jordanian export that “will be of interest to us, but I think we need to explore lots more”.

She said infrastructure, especially in the economic zones, was a priority for investment in South Africa.

“We have South African investments in the region,  I am sure that there are South Africans who will be interested in looking at that… we would also interested in investing in fast moving consumer goods, but that always depends on investors,” she added.

Speaking in the opening of the one-day forum,  South African ambassador to Jordan Molefe Tsele described South African and Jordanian relations as warm and growing. 

“South Africa is today one of the only two Sub-Saharan countries in Africa, where Jordan has an embassy, the other being Sudan,” Tsele said, adding that the ties between the two countries are a relationship of like-minded friendly countries, who share common political ideals about global and regional peace and stability.

However, he emphasised that bolstering business partnerships is also important in this regard.

“What is needed is to lift up this relationship to a higher platform through increased business partnerships and strategic economic relations,” he said.

The forum was held with the participation of representatives of several South African companies working in the fields of telecom, engineering, petrochemicals, power, water, software development and technology, in addition to representatives of Jordan chamber of commerce and investment commission.

According to Ahmad Zubi, director of studies and policies at the Jordan Investment Commission, Jordan provides both economically and politically stable environment for investment.

He also noted that investing in water efficiency projects is one of the country’s major priorities.

GAZA CITY — Already struggling under the weight of an Israeli blockade, Gazans are now feeling the effects of an Egyptian exclusion zone along their shared border that has sent prices soaring.

After the cost of his cigarettes nearly tripled, 18-year-old Jihad Ahmed now buys just a few at a time instead of a pack and smokes them sparingly.

Imad Shilbaya, who sold them to him, said Egypt's crackdown on cross-border smuggling tunnels was behind the price hike.

"The tunnels from Egypt have been closed, hitting stocks of cigarettes in Gaza hard and sending prices soaring," he told AFP.

Israel first imposed a blockade on Gaza in 2006 after militants there snatched one of its soldiers.

It was tightened significantly a year later when the Islamist movement Hamas seized control of the territory, which is home to 1.8 million people.

But some relief came through a honeycomb of tunnels from Egypt that brought in a wide range of consumer goods, livestock, fuel, as well as arms and money for militant groups.

Smuggling of building materials alone was worth more than one billion euros annually, according to Ayman Abed of the economy ministry in Gaza.

But the Egyptian military, which began a process of shutting down the tunnels after it overthrow Islamist president Mohamed Morsi in July 2013, stepped up its activity significantly in late October after militants in northern Sinai killed some 30 Egyptian soldiers.

Since then, it has been demolishing houses along the border to build a buffer zone in a region that has been rocked by insurgency since Morsi's ouster. 

So far, Egypt has destroyed 1,600 tunnels. In late October it also closed the Rafah border crossing, Gaza's only gateway to the world not controlled by Israel.

"Prices are very high since Egypt completely closed the tunnels," said Abu Mohammed, who owns a small supermarket west of Gaza City, noting hikes in the price of "milk, legumes and even cheese".

"We used to sell Egyptian cheese for 10 or 11 shekels; now it is more than 23 [about $6 or nearly five euros]. I don't sell it anymore. No one buy it at this price," he added.

And Mohammed Safi, who owns an electronics shop, said: "Prices of mobiles are higher since the blockade of tunnels. We can't get them as before. We used to sell iPhone 5s for 2,200 shekels, now the price is 2,600."

'Disastrous situation'

Products entering from Israel are far more expensive than those originating in Egypt, and largely beyond the means of the average Palestinian in the crowded coastal territory, where youth unemployment is running at 63 per cent.

Oxfam says more than 40 per cent of the overall population is jobless and that 80 per cent live on humanitarian aid.

The lack of cement and gravel to feed the construction industry accounts for 35,000 of Gaza's unemployed, Abed of the economy ministry indicated.

During last summer's war with Israel, UN figures show that around 20,000 housing units, or nearly 6 per cent of the housing stock, were severely damaged or destroyed. That resulted in more than 100,000 internally displaced persons.

Tens of thousands of other homes were damaged in the conflict and are still awaiting repairs and renovation. 

But since fighting ended on August 26, only 1,300 tonnes of building materials have crossed into the Strip, Palestinian officials say. 

"That's not enough to put up a single building," according to Gaza builders' merchant Suheil Tuman.

When distributed through the UN agency for Palestinian refugees (UNRWA), a 50 kilogramme sack of cement sells for 5.50 euros. But the price is 42 euros on the black market.

"When the tunnels were open, a tonne of cement sold for 380 shekels [80 euros] on the black market," Tuman indicated. "Today it is 3,800 shekels."

Economist Amr Shaabane said the economic situation "is literally disastrous. It has never been this bad in Gaza".

The reasons? "The blockade, poverty, unemployment, the trickle of goods entering and soaring prices." 

In the past, Gaza prices had always been far lower than in the occupied West Bank and Jerusalem.

"Today, Gaza market stalls offer Israeli goods at a price that is more expensive to begin with and to which heavy taxes are added on their entry to Gaza," the economist added.

AMMAN — Arab Businessmen’s Federation Chairman Hamdi Tabbaa underscored the importance of the 4th India-Arab Partnership Conference, which concluded in New Delhi recently, Tabbaaa stressed the need to deal with the challenges hindering the development of Arab economic relations with India, noting that Arab investments in India are around $125 billion while India’s investments in Arab countries do not exceed $6 billion.

Some 25 garment factories owned by Indians have been established in the Qualifying Industrial Zones in Jordan, with an investment of over $60 million, providing jobs to more than 9,000 employees.