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Imbalance of trade

Nov 19,2017 - Last updated at Nov 19,2017

Trade balance is one of the most important economic indicators, it reveals one of the distortions in the Jordanian economy and compares imports to exports.

In our case, this balance reflects a strange result that is by no means sustainable.

Trade figures for the first nine months of this year show that the deficit in the trade balance, meaning the excess of imports over exports and reexports, reached JD6,082 million, equal to almost one quarter of the gross domestic product. This is one of the highest rates in the world.

Coverage of imports by the proceeds of exports is around 36.2 per cent lower than last year’s rate of 39.3 per cent in the same period, an indication that our balance of trade is going in the wrong direction.

One may ask the simple question: Until when can Jordanians import foreign goods three times the value of their exports?

True, there are two major factors that make this state of affairs possible, if not justified: Jordan is a recipient of foreign aid in foreign exchange. Jordanian expatriates’ remittances are relatively very high and also come in dollars, which allows the central bank to be able to supply commercial banks with their needs of foreign currency to finance imports, excessive as they may be.

Unfortunately, these two important sources of foreign exchange to finance imports are not of a permanent nature. They are nor dependable. They may decline gradually or cease to exist, which will put the country in a difficult position.

If this were not enough, the government depends heavily on borrowing, especially in dollars, which is another undependable source that comes with risk.

The economic reform programme is meant to alleviate these negative factors. At a bare minimum, it may prevent the situation from worsening.

Ours is a free economy, so hopefully it can bring the situation to some measure of balance without having to place controls on imports and sacrifice the advantages of living in such an economy.

The picture can be seen from another angle when we look at Jordan’s trade balance with international blocs and find that Jordan sustains deficit with each and every one of these.

The European Union, for example, exports to Jordan goods for a value 26 times higher than that of its imports from Jordan. Yet, the government agreed to exempt the union products from customs tax.

By contrast, the EU imposed strict rules of origin that practically block Jordanian products from reaching its markets, an odd state of affairs that should be brought to an end.

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