17 June 1999
Letter from the Levant
Jordan’s economy:
Far from full recovery
Jordan’s Prime Minister Abdel Ra’ouf Al Rawabdeh’s recent remarks about the state of the economy have sent shock waves across the country. He announced before Parliament that the economy was effectively in the “recovery room”, or did he mean intensive care? He said friendly countries have showered Jordan with emotions but little else. “Don’t expect a single dinar yet,” came the hoarse voice of the Jordanian premier. The PM’s firebomb speech, aired on TV and covered by the press, was actually aimed at convincing deputies not to send back a draft law that will raise taxes. The shock treatment worked and the deputies sent the legislation to one of their committees for deliberation.
But it was Rawabdeh’s bold approach to an issue so sensitive, namely the state of the Jordanian economy, that created much controversy. Here was the head of the Jordanian government, the most informed official of the intricate details of the state saying in public that the economy remains stuck in a deep recession, that Jordanians should not expect or rely on Arab and foreign aid and that recent diplomatic efforts spearheaded by the King to ease Jordan’s foreign debt burden bore little fruit.
Needless to say that such statements were depressing and frightening. A decade or so after the economic debacle and the IMF administered adjustment program with all its pains and tribulations, Jordanians were still bogged down, stuck in the middle of the dark tunnel. This is how the country understood it. Rawabdeh’s bare bone revelations may have prodded deputies to yield to government pressure to raise taxes, never a popular thing, but they sure woke the nation up from its slumber.
One doesn’t know whether to congratulate the PM or denounce him for his candor. Unlike his predecessors he is not promising Jordanians milk and honey but more hardship, more taxes, and tougher times ahead. Don’t expect creditors to write off billions of dollars in foreign debt and don’t think investors are lining up to spend their money here, the PM was saying. In short don’t expect anything!
Rawabdeh’s statements during what was described as the hottest session in Jordan’s parliamentary history came under attack. To laymen as well as to potential and existing investors these are not good news at all. The effects of such statements could be damaging to confidence in the national economy. But that is one way of looking at it. Rawabdeh did not tell Jordanians something they did not already know. Ever since the tiff between the previous government and the IMF over Jordan’s “exaggerated” economic growth rates and other indicators, Jordanians have been suspecting that things were not moving in the desired direction.
Now they know that positive growth figures for the past three years were in fact humble or even in the negative and that the country’s debt burden of 1999 is in fact almost the same as it was in 1989. So after years of hardship and painful restructuring Jordanians are still facing the same economic and social challenges: a $7 billion foreign debt burden, nagging budget deficit, poor economic growth, unemployment and high poverty levels.
The PM’s intervention during Parliament session was indeed pessimistic but it was an important precedent. If we are talking about transparency and people’s right to know, then there you have it. Put very simply, Rawabdeh told Jordanians not to expect free hand outs from friends, Arabs and otherwise. For the economy to be taken out of the recovery room, the country must adopt further readjustments, fiscal, legal and otherwise in order to receive a good conduct certificate from creditors, who now seem to be holding us by the jugular.
Effectively the IMF plan aims at cutting government expenses increase its revenues, continue the privatization scheme and reform legislation. If Jordan meets certain targets then it could expect additional aid, loans and maybe some debt forgiveness. Not a bright picture, to say the least.
But since the PM has chosen to go public with this issue, Jordanians, the vase majority of whom will carry the brunt of these reforms, have the right to ask: What went wrong in the first place? Why have the previous measures failed? And since the issue is now in the open Jordanians have the right to ask about guarantees and assurances, time-frame and risks, alternatives and choices.
Back in the early 1990s the IMF and its prescription came under bitter attack from political parties because they saw them as conspiracies aimed at sucking the country dry. The government was warned against a social backlash as a result of the tough measures, which threatened to make Jordanians even poorer. Privatization was attacked as a ploy to sell public companies to the rich who will then abuse hapless Jordanian consumers.
But the government had no choice but to work with the IMF. The economy needed reform, the government was, and remains, too big for a small country of four million and the flow of foreign and Arab aid had come to an abrupt end.
In his attempt to explain what went wrong during the past few years, Rawabdeh reminded the deputies that regional and international conditions worked against Jordan. Who could have foreseen the Gulf Crisis and its disastrous consequences for the region and for Jordan in particular? Who could have anticipated over 120,000 expatriates returning to Jordan as a result of the crisis? The loss of Iraq as a main market was followed by the closure of Gulf markets and in recent months even the Asian financial crisis took its toll on Jordan’s mineral exports to industrialized countries in that region.
Jordanian could understand and appreciate these issues. But what they could not stomach anymore is talk about corruption, bad management of public companies and departments, nepotism and discriminatory state policies, bureaucracy and red-tape and archaic legislation. If they are going to make additional sacrifices then they should get more involved in state management. Rawabdeh’s approach may have launched a new process in governance based on open and more accountable government. He may not have intended this but the most heated session in Jordan’s history will be remembered as a watershed in the coming lean years.