The dilemmas of getting out of the economic impasse

Salameh daraawi
Salameh Darawi (Photo: Jordan News)
The current crisis facing the national economy was not born from the pandemic, but is the result of cumulative failures of official economic management, putting it in a tough spot, to the extent that we, unfortunately, are choosing between bad and worse to escape the pickle we are in.اضافة اعلان

Some deem that the more urgent problem facing the Jordanian community is that official bodies are at a loss in terms of a roadmap to get out of the economic crisis, insisting instead on short-lived solutions to the Treasury’s deficit, without taking into account their impact on other economic sectors in the near future.

This is true on all fronts, as the government is demanding the provision of JD580 million on a monthly basis to fulfil its financial liabilities, including wages, operational costs, and debt instalments and interest, which cannot be met without having a monthly deficit of no less than JD150 million, usually covered by domestic or foreign loans, or through other costly solutions on the political, security, social and economic fronts.

For example, if the government raised the price of gas in the current conditions we are in or imposed new fees and taxes, the move would have a relatively positive impact on quick revenue for the Treasuries, but the deficit would remain and resentment on the streets would rise.

Some even believe that the budget gains from higher prices and taxes would be met with losses amounting to multiples of those gains, should popular resentment grow into protests that would be highlighted in media and broadcast around the world, and then Jordan would see events similar to those in neighboring countries.

Such a scene would have alarming ramifications on the national economy on multiple fronts; tourism for example, which was steadily growing pre-COVID-19, threatens to continue on a negative growth trend even after the pandemic, as political and security stability are two key components for sustaining the tourism sector.

Expatriate remittances are also a candidate for potential decline, following their drop last year by 8 percent, a drop that is at risk of continuing should Jordan be politically destabilized, as Jordanians abroad would likely try to find safer havens for their savings, in countries not marred by tensions.

As for the investment climate, it is already failing in Jordan due to many reasons, some of which are administrative and legislative, and some are related to lack of investment opportunities in promising sectors that are closed to investment due to official policy, such as banks, universities, and hospitals. Hence, attracting foreign investment to the Kingdom does not hinge on legislative amendments, as much as it does on a stable political environment.

Any official decision on raising prices or taxes in the meantime is economic and political suicide that will contribute to diminishing the spending of the largest segment of society, as it constitutes new burdens on their incomes, which are already not sufficient to cover their basic needs.

For the first time ever, Jordan has a real competitive advantage, which is political stability amidst an extremely unstable region. Should this advantage be leveraged properly, important sectors, like tourism, investment and cash flow, will over compensate for the government’s fuel subsidies.

What is required is balancing political stability and Treasury stability in the short term, by resorting to uncostly administrative reform, pushing towards improving the local business and investment climate, through the removal of deformities, misalignments, and obstacles overshadowing investors and businesspeople, and limiting their ability to expand, or even continue at current capacity.

The important thing is to take the first step, before it’s too late.

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