Governmental momentum
towards remedying chronic economic imbalances in the national economy is
characterized by extreme sluggishness, despite the dire need for stronger
momentum on the issue of economic reform. Such reform is usually met with
resistance from various social segments who suffer a loss of their cumulative
gains. This fact cannot be ignored.
اضافة اعلان
However, the
structural reform agreement signed between Jordan and the International
Monetary Fund (IMF) last October, covering the years 2020–2023, constitutes
huge pressure on the government to move ahead with economic reform measures and
resist all forces standing in the way of said reform. Periodic reviews of
the agreement by the fund’s mission is one of these key tools pressuring
official economic policies.
The government does
not have many options to avoid full implementation to address the imbalances,
particularly with the current Minister of Finance Mohammad Al-Ississ, who is
pushing strongly towards fiscal reform and sound administrative levels of
spending and revenue collection and intrinsic growth.
The key structural
challenges and imbalances that require the government to make the right
decisions in their regard are as follows:
First: the continuous
general budget deficit, which is estimated to reach $2 billion after grants by
the end of the year. This is a huge figure that constitutes 4.3 percent of GDP.
The danger of this figure is that, in absolute numbers, foreign debt will rise
by the same amount as the deficit, which means more debt, leading to new
financial pressures on the Treasury.
Second: huge reliance
on foreign aid, which was estimated this year at $800 million. This figure is
less than that of 2020, but nonetheless contradicts the government’s positions
in its official economic statement, in which it affirmed its movement towards
self-reliance. However, reality points to more and more reliance by the
Treasury on aid, which has played a major role in saving the national economy from
going down a dark tunnel.
Third: public debt
payments, estimated in this year’s General Budget Law at $1.960 billion, which
serve as interest on some $40 billion of public debt, constituting 107 percent
of GDP.
Fourth: the high
pension and social support bills, amounting in this year’s budget to $2.2
billion, which on their own constitute more than 20 percent of the state’s
public expenditures. These bills are dangerous because they are constantly
rising, due to the failure to rectify measures and the delay in implementing
remedies.
Fifth: the difficulty
of growing foreign reserves due to the stagnation of the tourism sector, which
was impacted drastically by the repercussions of the COVID-19 pandemic. This
has caused the tourism sector to decline by more than 85 percent in 2020, a
drop that is expected stretch on at varying rates. This is in addition to the
drop in expatriate remittances, which dropped 8 percent during the past year,
due to economic recessions in Arab Gulf countries, where 680,000 Jordanians are
employed.
Sixth: the deficit in
the payment balance’s current and trade accounts, which is expected to increase
due to the drop in exports. This drop in exports is attributable to the
closures implemented by many countries in the region in order to combat the
coronavirus. Additionally, many countries in the region also implemented
protectionist measures to achieve economic security.
This might contribute
a continuing drop in national exports, which declined by 1.5 percent last year.
The government expects a 5-percent increase in exports this year, which is an
optimistic figure that might be strongly challenged should the pandemic remain
out of control and the vaccines fail to arrive with the required speed.
Seventh: the rise in
poverty and unemployment rates, which represent a true nightmare for the
Kingdom due to their grave security, social, and economic ramifications. They
may affect the stability of society if the necessary measures are not taken to
combat them. It is important to note that the current rates are the highest in
the Kingdom’s history since the 1989 economic crisis, during which poverty
rates reached 23 percent and the number of poverty pockets reached 32 across
the Kingdom’s governorates.
The official
unemployment rate during the last quarter of 2020, according to the Department
of Statistics, stood at 24.7 percent, which is an alarming rate for many
reasons. It may rise, because the economic growth forecast for this year
amounts to 2.5 percent, which is sluggish, and will not be able to accommodate
the annual number of graduates entering the labor market every year. Currently,
156,000 graduates of various types enter the job market annually. What has to
be taken into account as well is the difficulty of attaining employment abroad,
due to the difficult conditions in Arab Gulf countries that have been impacted
by the global drop oil prices.
The former imbalances
constitute a real challenge for the government, and require strong political
will, through a reform program agreed upon with the Lower House, which usually
represents stumbling block for structural reforms.
.jpg)
.jpg)
