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On the right track, more needed

Aug 01,2017 - Last updated at Aug 01,2017

IMF’s most recent report was a mixed bag of good news on progress and some expressions of concern about challenges that continue to impede full economic recovery.

The report was made at the conclusion of Article IV consultations with Jordan, during which an IMF team conducted field visit, collected economic and financial data and held discussions with concerned officials in the country.

The report concluded that the national economy is projected to grow by 2.3 per cent in 2017, inflation will stabilise at around 2.5 per cent by the end of the year and the current account deficit will gradually decline, due to structural reforms and fiscal consolidation. 

IMF executive directors commended Jordanian authorities for “preserving macroeconomic stability and external viability, reducing the fiscal deficit, maintaining prudent monetary policy and ensuring a sound financial system”, and were encouraged by the authorities’ commitment to continue the removal of exemptions on the general sales tax and customs duties.

They underlined the need to support current efforts with reforms to tackle tax evasion and increase compliance, ration expenditures, strengthen social safety nets, sustain reforms in the energy and water sectors, and improve debt management, among others.

They also deem the monetary policy appropriate and underlined the fact that the exchange rate peg continues to be an important anchor for the economy.

At the same time, indicators for the first few months of 2017 show a recovery in exports, tourism receipts and remittances, relative to 2016, which is all encouraging.

On the reverse side of the coin, the IMF concluded that despite the important positive signs, the country still faces challenges, including an economic growth that is below potential, high unemployment and difficult social conditions.  

The regional turmoil and the presence of a big number of Syrian refugees, now estimated at around 1.3 million, do not help in any way, either. 

To help, the IMF officials stressed the importance of implementing policies and reforms to bring public debt towards more sustainable levels, boost investment and productivity, and enhance inclusive growth.

They stressed that reforms are crucial to efforts to preserve macroeconomic and external stability, place public finances on a sounder foundation and lessen risks to debt sustainability, while a financial inclusion strategy, along with greater facilities to support credit and the enactment of the secured transactions law would help enhance access to finance and support investment.

The business environment would be greatly helped through simplifying regulatory processes and enacting the inspection law, the IMF said, calling for advancing reforms to lower the formal cost of labour to promote greater employment opportunities, particularly for young people and women.

The fund’s conclusions are realistic and the suggestions, coming as they do from experts in the field, should be taken seriously.

The concern is that if discernible positive economic and financial improvement happens at micro level only, the population as a whole will barely benefit.

 

A better way might be to effect improvements at macro level, for they are then bound to filter down and make people feel the difference in their daily lives.

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