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IMF in Jordan

May 08,2017 - Last updated at May 08,2017

In the last Economic Policies Council meeting, which was chaired by His Majesty King Abdullah on May 3, the discussion focused on the initiative to give economic growth a big push.

Such an agenda has transformed the councils’ role from proposing laws and new directives to an instrument overseeing the economic plans and monitoring their respective implementation.

The economic vision has failed thus far to achieve the growth levels envisaged in the development strategy document launched two years ago.

If economic performance in the remainder of this year continues at the level witnessed in the first five months so far, our annual GDP growth will not reach even 2 per cent.

Indicators show that nothing has actually improved. Trade, services, public works, foreign investments and net labour remittances are showing signs of fatigue.

Transportation, housing, industry and trade are rising on the suffering scale.

But what if the economy does not register the growth projected in the budget and the IMF programme?

Such an eventuality would necessitate a revision of the agreement with the IMF.

The world monetary authority would demand further measures in order to rectify the situation and to lower the debt to GDP ratio.

The current IMF formula will only quench the economic thirst with saline water.

While the growth plan promises results in five years, the IMF would ask for further measures which would crowd out private investment, alienate more investments and make it almost impossible to achieve growth and lower the debt rate.

The private sector has to be given the reassurance that the government will not introduce new austerity measures.

The psychological situation that is dampening down expectations will worsen by more of such measures.

At best, we can say that the government has resolved its own problem (temporarily) at the expense of the rest of the economy.

We need to renegotiate our standing agreement with the IMF, regardless of the fanciful euphemisms it goes by.

We can still pledge to lower the debt equity rates from 95 per cent in 2016 to 77 per cent by the end of 2021. Yet, we need a grace period of two years, during which we undertake not to allow the rate to exceed 94 per cent in 2017 and 93 per cent in 2018.

In the remaining period (2019-2021), it will become easier to meet the target.

Instead of decreasing the volume of indebtedness in the first two years, let us focus on achieving higher rates of growth by calming the fears and addressing the pessimism which has eroded chances of growth.

His Majesty was right in expressing concern over the meagre growth rates achieved thus far.

The current IMF programme does not do much to dispel apprehensions.

We need to reschedule the IMF programme to allow for a two-year grace period to address the private sector’s lack of faith in the prospects of economic growth.

 

 

The writer is a former Royal Court chief, deputy prime minister and member of Senate. He contributed this article to The Jordan Times.

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