A Shortcoming Reality: What Will Mulqi Do?!

تم نشره في Mon 7 August / Aug 2017. 12:00 AM - آخر تعديل في Mon 7 August / Aug 2017. 09:39 PM
  • Jumana Ghunaimat

In my last article, we discussed the government’s four options to secure JOD550 million in 2017, according to Jordan’s agreement with the International Monetary Fund (IMF).

It’s an extremely difficult situation.

On one hand, Jordan must meet the terms of the Extended Fund Facility (EFF) in order for the IMF to certify that that Jordan is indeed advancing reforms. But on the other hand, the Kingdom needs a solid, objective assessment of the citizenry’s ability to withstand further financial pressures, given the people’s fixed incomes and Jordan’s limited resources.

If Jordan is to explore the option of driving up GDP growth rates, instead of pushing more taxation decisions, then Jordan must maintain a minimum growth rate of 7 per cent for the following years.

How will Jordan, then, overcome the multitude of hurdles, regional and domestic, which have placed humongous pressures on the economy, from wars to regional rivalry and political crises?

So far, it seems like the unannounced economic embargo on Jordan still stands.

The border crossing with Iraq, regardless the promises, remains closed, due to Iran’s influence on Iraqi decision making and the powers in play there.

Hope from the East is not as imminent as it once was.

To the North as well, the borders are also closed, and there is very little hope on the horizon.

All in all, the external environment entails significant constraints to economic recovery and exportation, let alone investment.

Likewise, as the Gulf Crisis intensifies to the south, its implications on Jordan and its economy is no less crucial.

In every direction, Jordan is losing economic grounds.

The entirety of the regional situation is disintegrating, from losing our primary exportation market to blocking vital land freight routes.

Needless to say, the recession of grants and aid makes this option as farfetched as any really, given the status quo.

All of the Arab countries which have once funded Jordan no longer do, despite their knowledge of the Kingdom’s financial predicament.

As a result, the chances that Jordan overcomes these obstacles are close to none.

Hence, it is crucial that we depend on ourselves to devise a fundamental solution, by implementing the IMF’s terms, which are highly focused on increasing domestic revenues.

A new taxation law must be formulated to expand the taxable base and increase custom fees on various commodities and services, including the most sensitive ones, like manufactured foodstuff.

The IMF’s recommendations also include changes to the electricity tariffs, to resolve the burdens our Treasury has endured over the years, causing losses and incurring further debt.

Still, till this very day, the government carries immense costs due to the subsidies extended to support the low-income and impoverished segments of society, who consume less than 500 kilowatts per month, per household.

The government sees that the IMF programme seeks to gradually remove tax exemptions, to increase revenues and control public debt, in order to reduce it, while protecting the frail segments of society.

Officially speaking, removing tax exemptions is expected to make the taxation system more efficient and effective when it comes to raising revenues and encouraging investments.

More so, it may even be fairer, due to the fact that these exemptions are actually extended to sectors which are engaged by the population’s wealthiest segments.

The government is expected to introduce several reforms, including measures to control and limit tax evasion, increase tax revenues, and protect society’s most fragile classes.

However, the problem lies in that these fundamental solution require years to realise, that is if they work out.

Such solutions include shrinking expenditures and slimming the public sector, as well as lowering public sector wages and finding new exportation markets.

These also include developing sounder credit facilitation mechanisms to support SME operations.

Notwithstanding, the government is also trying to get the International Community to meet its commitments, in accordance to the London Donors Conference, two years ago.

Received aid has significantly fallen short from the set targets, agreed upon in the London and Brussels conference.

Meanwhile, facilitations for exportation have not met the estimated projections in regards to the European market.

The gap between what is actually doable and what really needs to be done is unbelievable.

So, how will the government bridge this rift?

This article is an edited translation of the Arabic version, published by AlGhad.