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About the IMF’s fifth review

IMF
(File photo: Jordan News)
IMF

Yusuf Mansur

The writer is CEO of the Envision Consulting Group and former minister of state for economic affairs.

A few days ago, the IMF concluded its fifth review under the Stand-By Arrangement with Jordan. The review will bring the total of IMF disbursements over 2020-24 to around $2 billion, and signal to donors that Jordan is well on its way to effecting reform, which would encourage their loans and grants. Still, reading the review elicits skepticism and questions. اضافة اعلان

The review starts with statements like “despite turbulent global economic conditions” (as if excusing whoever and whatever for the performance of the economy); the “negative impact of the fuel and food subsidies” (or any type of subsidy that is of any significance, which anyways is scant these days), which gives a pat or two on the shoulder of the government for either increasing taxes or broadening the tax base. It explains away the lackluster performance of the economy and the persistently low economic growth rate; praises austerity, and when it comes to monetary policy, the review eloquently stresses that the monetary policy should be focused on maintaining the stability of the Jordanian dinar-US dollar peg (never really stating how and by what means, other than matching the US Federal Reserve’s discount rates).

The age-old modus operandi that is espoused by the IMF for Jordan (and most likely everywhere else, since cookie-cutter policies are easier to implement, and have been tried and defended everywhere else) is to exercise a frugal fiscal policy and cut spending on subsidies. 

Little is said of the quality of spending and where the loans go (usually to pay government salaries, pensions and other loan repayments), and even less is underscored regarding the required capital expenditures to fix the energy, water, public transport and other sectors that are either dilapidated or becoming non-existent (nearly true when it comes to public transport and the vanishing water supply).
… difficulty lies not so much in developing new ideas as in escaping from old ones.
In short, the conclusion is that the government should do less and the private sector should do more, which is no more than a convoluted demonstration of a brilliant statement by (my favorite economist of all time) John Maynard Keynes: “Capitalism is the astounding belief that the wickedest of men will do the most wickedest of things for the greatest good of everyone.”

When the IMF reviews address needs and deficits (other than the budget deficit), one sees them discarding or pushing away imminent problems such as low economic growth (usually blamed on some regional or global turbulence), rising unemployment and poverty rates, and declining trust in the institutions of the state.

Such apathy is baffling in many respects. The usual remedy is slow, broad-brush-like, and long-term in nature: “steady progress on structural reforms to boost female and youth employment; enhance labor market flexibility; promote competition; and enhance governance and transparency”.  Such recommendations invoke Keynes’ famous statement in response to the classical economists’ infamous reform (or lack thereof): “In the long run we are all dead,” which also means that we have no time to wait, we need a significant positive transformation now.

On the other hand, public sector economic pundits’ “difficulty lies not so much in developing new ideas as in escaping from old ones” to paraphrase Keynes.

Given that the rational thing to do is to motivate greater economic growth through quality spending that enhances the productivity of the economy rather than the IMF’s tried and failed economics, will Jordan ever depart from this paradigm and accept other alternatives? One can only be hopeful.


Yusuf Mansur is CEO of the Envision Consulting Group and former minister of state for economic affairs.


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