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A more confident tone in talks with IMF

May 23,2018 - Last updated at May 23,2018

Officials involved in the ongoing talks with the International Monetary Fund (IMF), at the fiscal and monetary levels, seem more confident, and rightly so, in this critical round. 

For starters, the IMF’s assessment of progress in reforms undertaken by the government is extremely important, and it is not about the money. What really matters is that positive reviews mean that Jordan’s international credit rating will improve, or at least remain at the currently satisfactory level. A drop in the rating is catastrophic because lenders will automatically hike the interest rate on loans sought by the country to cover expenses. 

But things look better regarding the country’s monetary and fiscal positions. In fact, Jordan boasts a solid monetary situation, thanks to the efforts by the Central Bank of Jordan (CBJ), which has, since late 2011, adopted prudent policies that have saved the country’s economy and doubled foreign reserves from $6 billion to around $12 billion currently through careful adaptation to economic developments and a home-grown recipe that did not heed tips offered by international organisations. At a time when the world was pursuing a quantitative easing policy, the CBJ embraced a contractionary monetary policy to enhance the attractiveness of the dinar as a reliable saving pool. 

Simultaneously, the CBJ adopted unconventional instruments to stimulate economic growth ensuring low interest rates for borrowers from six targeted sectors that collectively contribute 35 per cent of GDP, including ICT, renewable energy, agriculture, tourism, industry and construction and architecture consultations. 

Having in mind the crippling crises and regional developments over the past seven years, including a burdening refugee influx, the outcome of such policies is commendable. Add to that positive economic indicators such as a 30 per cent, and counting, rise in exports to Iraq in the first third of the year, compared to the same period last year, an increase in expatriates’ remittances and a flourishing tourism industry, which grew by 12.5 per cent last year. More good news about tourism is the unprecedented diversity in the nationalities of visitors, which testifies to the country’s stability and hospitality. 

The fiscal side of economic policies, admittedly, has been flawed and constantly in need for remedial work. The chronic budget deficit, public overspending and failure to utilise available resources have made self-reliance a far-fetched goal.  

However, the term has recently been used by officials more frequently and confidently. Self-reliance was the key mandating reason behind two painful and unpopular, yet essential, moves by the incumbent government, which re-adjusted the subsidy system and sales tax last year and has just recently made changes to the Income Tax Law, bracing for an uphill battle at the Parliament, which is expected to debate the controversial bill in the second half of June. 

When the government endorsed the draft law this week, it had a “message to the world” as put by State Minister for Media Affairs and Communication Mohammad Momani, who said that the corrective measures taken by the government indicate that “we are taking economic reforms seriously and carrying them out at the right pace”.

The CBJ leaders and concerned government officials, who are dusting off their hands from two bitter battles, will make sure the message gets through, supported by figures and facts, to their guests from the IMF. 

 

The writer is the deputy chief editor of The Jordan Times

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