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Today, November 6, 2017
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Home » Opinion » Fahed Fanek » Economic challenges get priority
Economic challenges get priority
Nov 05,2017 - Last updated at Nov 05,2017
His Majesty the King told the people once again that our internal and external security is not a problem, for, we are able to protect ourselves.
The real challenge is of economic nature.
High on the list of economic challenges that face Jordan is the weak budget and its deficit before and after foreign grants, which are gradually declining.
Under the circumstances, the government was obliged to cover the gap by domestic and foreign borrowing, which led to the accumulation of debt beyond the safety limits.
At the beginning of this year, and with the launching of the economic reform programme in cooperation with the International Monetary Fund, public debt reached 95 per cent of the gross domestic product.
Debt has been rising fast towards the level of 100 per cent, which is considered a danger point; the debt to GDP ratio approaching the 100 per cent mark is considered a red line.
Under the circumstances, it is not surprising that the government of Hani Mulki became, in the first place, an economic government the performance of which is judged by economic and fiscal measures and indicators.
The first solution that may come to mind to reduce deficit is to reduce public expenditure and increase domestic revenue.
Expenditures are not flexible; most cannot be reduced and must be paid. Increasing domestic revenues can be achieved only by imposing more taxes and reducing subsidies, but there is strong popular rejection of such approach, which puts the government in a difficult position.
The third or fourth solution that raises no objections or resistance, that can raise the standard of living, reduce unemployment and increase revenues, all at once, is economic growth.
Growth is obviously the ideal solution to most economic social and fiscal challenges. It is a welcome solution, but unfortunately it is very hard to achieve.
It cannot be attained simply by making more decisions, for experience has taught us that low or absent growth is a challenge to which cosmetic solutions are of no use. Economic growth rate in the first quarter of this year was 2.3 per cent. It declined to 2 per cent in the second quarter.
There is no reason to believe that the economic growth rate for the whole 2017 will exceed 2.3 per cent, which is an optimistic rate suggested by the IMF.
The new factor that allows us to expect at least a gradual improvement of the situation is the application of the economic reform programme that is designed to remove distortions and negative factors.
Jordan used to be able to weather existential challenges over the years. Will it be able to face the present economic challenges as it always did?
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Fahed Fanek
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