Second batch of gov’t reforms present ‘promising strategies’ — economists

AMMAN — Following the announcement of the second batch of government economic reforms on Monday, economists concurred that the new measures are “promising strategies, albeit in need of further support”.

Prime Minister Omar Razzaz announced the cancellation and merging of eight institutions and ministries, as well as the minimisation of a number of commissions in the remaining bodies.

The government also said that a general framework will soon emerge for independent government bodies and institutions.

“It is a positive sign that the government is following a strategy that has an end goal to achieve. An inclusive economic reform plan is what is needed to stop the economic slowdown and initiate a boost instead,” said economist Husam Ayesh.

“More than 75 per cent of commissions created within ministries and government institutions after 2004 should be eliminated,” he added.

The elimination of “obsolete” government bodies was said by Ayesh to “have immediate positive effects on citizens because it cuts government spending and thus leaves more room in the budget for services and programmes that raise the quality of life”.

Although economists concurred that it was “impossible to accurately measure” what these reforms can contribute towards increasing the GDP or reviving the economy, given that they are “more general strategies than number-bound steps”, the reforms were agreed to be “an economic transformation and the stepping stone for a better future”, Ayesh said.

Among the reforms was the Central Bank of Jordan’s (CBJ) commitment to providing JD100 million in support of house ownership by low-income individuals.

Economist Adel Bino said that in the proposed programme, the CBJ “seems to have realised and partially fixed a problem that faced a previous similar programme”.

He told The Jordan Times in a phone interview that the CBJ had previously tried to implement a similar programme to support small- and medium-size enterprises, but that it did not succeed because “the loans were provided via commercial banks that require potential borrowers to put down large guarantees that the borrowers could not afford, and they also charged high and floating interest rates that, again, borrowers deemed too costly”.

Under the new reforms, Bino said, the “CBJ must have realised this, as they have now decided to provide assistance by at least partially guaranteeing repayment by low-income individuals”.

However, he said that from an economic point of view, this programme represents “a direct subsidy to low-income individuals that, although it may have favourable consequences in the short-term, may have detrimental consequences in the long-run, first, because these loans may be abused and borrowers may still default and second, because the CBJ may be viewed as a competitor to commercial banks”.

He noted that it might be a better strategy if the CBJ “worked on enhancing competition in the banking industry on the one hand and found alternative mechanisms for implementing its programmes instead of through commercial banks, on the other”.

Concerning other measures, government statistics announced by Razzaz showed that the real-estate reforms implemented under the first bundle have helped raise the number of sold real estates by 93 per cent. Measuring the period between October 2018 and November 2019 shows that the number went from 1,760 sold real estates in 2018 to 3,399 in 2019.

However, according to Bino, it is “hard to conclude” that the increase was a result of government measures alone.

Ayesh also added that economically, it would be better to take “more tangible steps rather than general strategies if the government wants to see immediate change”.

“Perhaps the government is currently unable to take bold steps such as reducing taxes or interest rates, but that would certainly yield greater, more striking positive effects, so hopefully we can see that in future reform batches,” he concluded.