Worrying Times for All

By: Jumana Ghunaimat

تم نشره في Sun 5 June / Jun 2016. 02:32 AM
  • Jumana Ghunaimat

According to latest news, the International Monetary Fund (IMF) mission, headed by Martin Cerisola, left the Kingdom last Thursday, with the finalised agreement with the government on the Extended Fund Facility (EFF) unsigned.

An evident change is in that the duration of the programme has been reduced to three years, from the date of signing, instead of four.

The departure, notably, is temporary. It does not mean that the government will not sign; given the immense domestic need to secure guarantees by the Fund, on access to loans at least, not exceeding USD1 billion, in spite of its implication on public indebtedness, currently at 93 per cent of Jordan’s GDP; noting that driving down total debts, standing JOD27 billion now; to 83 per cent, is a decisive prerequisite by the IMF.

During their stay in Jordan, the mission team met with local officials, including Central Bank (CBJ) Governor, Dr Zyad Freiz, and Minister of Finance, Omar Malhas. And ontheir part, the Jordanian government and officials met several times, exclusive of the Fund, to look into the details of the programme, last of these meetings was held at the Prime Ministry right before the current government was sworn, attended by Premier Dr Hani Mulqi, and both the Minister of Finance and CBJ Governor.

According to what is being deliberated, negotiations with the IMF team were tough, and Jordanian officials were not giving totally into the wishes of the Fund. That said, fact is; there remains little manoeuvre margin for Jordanians to negotiate, given the pressing need for the IMF deal, eventually.

The atmosphere is not comforting, for both sides. The measures outlined by the Fund preface for utterly uneasy years to come; more so, coarse and difficult years. Which is what the government is trying to negotiate; the difficulty of the measures and conditions outlines.

Shrinking the debt to GDP rate over the years of the programme, given the standing economic situation; particularly that it would require a GDP growth range of 7 to 8 per cent, annually, while ours topped at 2.8 per cent, makes this term more or less “miraculous”. Experts with insights into the situation concur, or else; achieving it would be at a crucial cost socially

The way to lower public indebtedness requires work in two directions. The first, is lowering expenditure. Here, the Fund looks into subsidies on commodities and services, instead of wasteful public expenditure; to “control”. Which means that the door is open for the suggestion to annul subsidies on electricity, water, and bread; given they cost the Treasury hundreds of millions of dollars.

The second course, not any less cruel, socially speaking; is increasing revenues. This draws a line, in that we do not know whether or not the current government would follow down the same paths previous governments drew out; will this government address tax evasion, as a window to increase revenues? Or will they go for the easier option, which is to expand the base of income tax payers. “Is it possible that 97 per cent of Jordanians do not pay taxes?” this old official broken record takes light away from the truth. The truth is that taxation here is too high, not to mention unfair; and everybody pays it all the same; the poor, the middle class, and the rich. This is confirmed by information affirming the increase of taxation burden domestically. Which means, in the end; that there are imbalances in our taxation system, that require to be reviewed in whole, not just in regards to the Income Tax.

Another issue the Fund seeks to address, for the first time; as part of the upcoming EFF programme, even though it is a purely domestic, governmental matter; employment. The IMF has begun to realise the threats of increased unemployment among Jordanians. The figures, in this regard; even in the eyes of the Fund, have become increasingly worrying. This is due to the massive shortcomings, locally; in terms of managing labour market and business environment enhancements that would serve domestic, Jordanian employment. The Country has 700 thousand foreign workers employed. Surely, should the labour market become more organised and the business environment be bettered, a percentage of foreign labour could be substituted by nationals.

A new economic programme, supervised by the IMF, is an unescapable inevitability. The problem, however, is in that we have indeed implemented the credit qualification and assessment programmes for the durations 2012-2015, but still did not reach the general target; containing our financial crisis. So how do we guarantee the results of the new programme are going to be any different this time?