Ammon News - by Fahed Fanek

According to a report by the staff of the International Monetary Fund, the value of investments that took place in Jordan during 2011 was equal to 23.9 per cent of the gross domestic product, and the national savings, distinct from domestic savings, were equal to 14.4 per cent of the GDP.

The above figures highlight the importance of foreign investment flows, on the one hand, and of expatriate remittances, on the other hand. Part of these remittances go to investment purposes, and part to savings, but the bulk of the funds is used to finance consumption of expatriates’ families staying at home, which explains the reasons behind Jordan’s extensive imports.

This state of affairs takes place when domestic savings are negative, as the value of total private and public consumption exceeds the value of GDP, which of course does not include expatriate remittances, foreign grants and loans.

This particular structure of the Jordanian economy is unusual. It indicates special circumstances and heavy dependence on external factors that have a substantial, sometimes crucial, impact on the country’s economy, balance of payments and general performance.

This structure of the economy and the factors that influence its direction make it imperative on the Jordanian authorities to give full attention to building strong confidence in the country, a positive political image and a healthy and attractive investment climate.

The credit rating of the Jordanian economy, made by international grading agencies such as Moody’s and Standard and Poor’s, has crucial importance for potential investors who depend on such ratings in making judgments on the various countries’ sovereign risks and, consequently, favour a country over another as a possible destination for their investments.

The investment climate in a given country is usually judged by the competence of the economic management, the extent of accountability and transparency of officials, the laws and the judicial system, all of which are essential for the success and prosperity of the economy as they enable a country to attain maximum benefits.

Jordan could benefit from its strategic location in the heart of this rich region with plenty of cash surpluses searching for investment opportunities.

On the other hand, the economic structure, of Jordan like of any given country, is always subjected to scrutiny. It does not help to post a high budget deficit, exceeding 3 per cent of GDP, nor is it useful to an accelerating level of public debt, even if two thirds of this are due to local creditors and are denominated in local currency.

A serious programme for economic reform and adjustment is required for Jordan’s interest, before the IMF, the World Bank or the European Union come up with recommendations.

Jordanian decision makers should not wait until they find themselves under external pressure to do what they have to do. After all, they have the duty to discharge their responsibilities fully.

The right instrument to measure the quality of economic and fiscal governance, under the circumstances, is to undertake and carry out a credible programme of fiscal and economic reform, aiming at the restoration of social and political stability.

An indebted country like Jordan, with few resources, cannot afford to protect consumers from higher world prices, be they related to fuel or foodstuff.

Leaving things to run their course leading to the crisis is not an option. It is suicidal behaviour that responsible officials should not accept.

Jordan has a new government expected to face challenges head on, instead of wait-and-postpone policy.


* Jordan Times