Questions persist over Jordan’s economic recovery plan

Economists say that the government’s talk about the need for self-reliance was unrealistic in light of its poor resources and mounting setbacks.
Wednesday 08/07/2020
a file picture shows a Jordanian man opening his currency exchange shop at the Jaber border crossing between Jordan and Syria. (AFP)
a file picture shows a Jordanian man opening his currency exchange shop at the Jaber border crossing between Jordan and Syria. (AFP)

 AMMAN – Confusion and uncertainty have marked the Jordanian government’s handling of the country’s deteriorating economic state, especially after the outbreak of the coronavirus pandemic that has not yet been contained.

After months of promoting self-reliance as the country’s debt exceeded the ceiling of $43 billion, the government of Omar al-Razzaz is now setting its sights on foreign support in the form of loans and bonds, which could deepen the kingdom’s economic crisis in the medium term instead of resolving it.

Economists say that the government’s talk about the need for self-reliance was unrealistic in light of its poor resources and mounting setbacks, which have affected productive sectors as a result of the coronavirus outbreak.

In a bid to increase liquidity, Razzaz’s government recently issued eurobonds worth $ 1.75 billion to pay off debts owed internally.

The finance ministry said the issuance of $500 million in bonds at 4.95% over a 5-year maturity and $1.25 billion in bonds at 5.85% over a 10-year maturity was oversubscribed by more than 6.25 times after attracting bids worth over $6.25 billion.

By issuing these bonds to borrow from global markets, Jordan hopes to inject liquidity into the private sector by paying the arrears of the government over the past years, especially for the medical and energy sectors and contract workers.

The kingdom’s private sector is currently facing a major crisis, which was deepened by comprehensive lockdown measures that extended for weeks to curb the coronavirus pandemic.

Now, the government is trying hard to revive the private sector through a package of measures, including giving employers the right to reduce wages by 60% and providing financial support for affected companies.

During a visit Monday to the Ministry of Planning and International Cooperation, Razzaz said financial assistance and donations provided to the kingdom reflect “global confidence” in the performance of the national economy.

“This week, we are focusing on confidence in the Jordanian economy, our fiscal standing, our foreign reserves and the private sector’s ability to recover and deal with emergencies,” he said.

He added that the finance and planning ministers will soon discuss the government’s efforts to attract investments over the last months of the COVID-19 crisis.

Razzaz’s statement to celebrate the extension of more loans appears contrary to the promises he made last year that the government would prioritise debt reduction.

In an attempt to reassure the public that the loans and bonds obtained will be disbursed for the purposes assigned to them and in accordance with the objectives set, Razzaz stressed that there would be transparency and disclosure to keep the public informed about financial support offered to the kingdom, including soft loans and grants and spending mechanisms.

Minister of Planning and International Cooperation Wissam Rabadi briefed Razzaz on foreign assistance provided to the kingdom, areas of spending and auditing mechanisms during their recent meeting.

He said there will be focus on “the Prime Minister’s directives concerning the importance of adopting a transparent approach and informing citizens about the monitoring and exchange mechanisms and the system used in grants and loans and their role in financing projects.”

There have long been doubts about Jordan’s aid disbursement plan, prompting Razzaz to address the issue of transparency.

Razzaz has recently displayed some optimism about the kingdom’s economy, noting that, despite the crises allied countries face, Jordan enjoys international support capable of lifting it from its economic depression.

However, some were sceptical about Jordan’s roadmap for economic recovery.

The head of the Jordan Chamber of Commerce and Senator Nael al-Kabariti previously expressed concerns about the kingdom’s level of debt, calling for a different strategy to address the crisis.

Jordan’s foreign borrowing has caused its debt to GDP ratio to spiral to 110%.

For years, its economic crisis has worsened due to patchwork policies by successive governments.

Razzaz’s government, which was formed amid unprecedented popular protests in 2018, made no fundamental changes to the country’s economic policy. That caused the debt ratio to grow and unemployment to increase to more than 19%.