The writer is CEO of the Envision Consulting Group and former minister of state for economic affairs.
In light of the announcements made by Brazil, Russia, India, China, and South Africa (BRICS) challenging the supremacy of the US dollar, and because the Jordanian dinar has been pegged to the dollar, many in Jordan have expressed concern about the American currency. The debate regarding the dollar as the world's reserve currency is global; therefore, it warrants some discussion of the merits and demerits of such a claim regarding the dollar.
In a recent article “Washington’s New Narrative for the Global Economy” in Project Syndicate, Dani Rodrik claimed that US policymakers, “believe that the post-1990 model of globalization, which prioritized free trade and free markets over national security, climate change, and the economic security of the middle class, has undermined the socioeconomic foundations of healthy democracies.” This is a new language, a different discourse from the one the developing countries are used to hearing about the benefits of trade and globalization. And what may have caused this new reality is China’s rising world supremacy.
In many developing countries, both fiscal and monetary policies are restricted by the designs and stipulations of the Bretton Woods institutions, including the International Monetary Fund (IMF), World Bank, and the World Trade Organization. Moreover, economic policy is guided de facto by aid and international aid institutions. Worse still, the capital expenditures category in those governments’ budgets, which underpins any future domestic development effort, is dependent upon and relegated to aid funds, which fluctuate and hinge upon the willingness and mode(s) of the donor economies, and, thus, derogate development.
Consumers and traders are requesting that the banks postpone their monthly loan payments. And the outcry and its justifications, supported by a group of parliamentarians, have been rebutted by many seemingly objective arguments from the Central Bank of Jordan (CBJ), the bankers themselves, and several pundits. However, the debate gained momentum during the Holy Month of Ramadan and the upcoming Eid holiday.
Countries like Jordan, which adhere to and follow the reform paradigms of the Bretton Woods Institutions — namely the International Monetary Fund (IMF), the World Bank, and the World Trade Organization — hardly ever focus on assuaging inequalities, including gender inequality, which combine to create costly deficits in their economies. The government should avoid being labeled as a creator of inequalities by simply ignoring them in the course of its avowed compliance to IMF policies.
A few days back, both houses of Parliament approved a new, deformed, and paralyzed Competition Law. The steps and time it took to finally trash such a vital piece of legislation (actually the most important law in any developing country) should be made into a course on how not to do politics. The outcome of the exercise is excruciatingly painful and will become a source of embarrassment for years to come.
Global monetary tightening has been spearheaded by the Federal Reserve (Fed) — the central bank of the US — and the European Central Bank (ECB). Both have been aggressively fighting inflation caused by the Russia-Ukraine war, heightened post-COVID demand, and the disruption in supply chains, which peaked in the US at 9 percent in June 2022, followed with some lag by the euro zone at 10.7 percent in October 2022.
The banking sector in Jordan witnessed fantastic growth figures in 2022 relative to 2021. Last year, the year-on-year profits of the banking sector grew by 38 percent. However, social media has been rife with criticism and concerns over this profitability and claims that it is harmful to the economy. While it is clearly beneficial to an economy to have a healthy banking sector, a pertinent question arises: does the growth of the financial sector lead to growth in the economy? The answer, although intuitively obvious, is not immediately clear.
Have you ever asked yourself what the cheapest governorate to live in is? If not, have you asked what is the most expensive? Since I was recently reviewing the Consumer Price Index (CPI) for January 2023 (which is hardly considered scientific or even semi-rigorous research), let me tell you.
A common observation and complaint in Jordan is that policymakers are hardly ever held accountable for their performance while in office. One way to evaluate policy leaders’ successes and failures is to examine the impact of their policies or terms in office on the value of stocks in the Amman stock market — more than half of which is comprised of the savings of Jordanians. A quick review of what happened to market capitalization of the domestic companies listed in the Amman Stock Market from 2007 to 2020 is illuminating.