Ex-Jordanian deputy premier calls for revision of 'failed' monetary policies
(Jordan Times) — Former Deputy Prime Minister Jawad Anani on Tuesday called for a revision of the Kingdom's monetary and fiscal policies, which he said have failed to ensure economic growth in the past 10 years.
Anani, who was addressing a gathering at the Association of Banks in Jordan, also urged pegging the dinar to a “basket of currencies” instead of to the U.S. dollar.
“I am not calling for the devaluation of the current rate of the dinar,” Anani said. “But the national currency should not be linked to the dollar alone. This trend should be changed,” said Anani, who was once a Royal Court chief.
Anani's proposed “basket” includes the euro, and the Japanese yen as well as the U.S. dollar. “The monetary policy's target in the past decade was to build a strong foreign reserve which we have now achieved. But we should change this trend and target economic growth which has been neglected in the past 10 years,” he said.
“The monetary and fiscal policies should be elastic and not rigid as they are now,” he added.
Government officials have repeatedly said that enhancing the exchange rate of the dinar and maintaining strong foreign reserves are the most important component of the restructuring program the Kingdom has undertaken since the early 1990s.
But they also admitted that this policy has affected the economic growth rate. The Kingdom's foreign reserves currently stand at $2.5 billion, of which $500 million were revenues from the sale of stakes in government-owned institutions and companies.
“Why are we so afraid? Why do we insist to have higher foreign reserves?” asked Anani. “We should not be obsessed with such a target. Instead we should turn to other goals, namely to achieve higher economic growth rates.”
Saying that the country should set a goal ceiling in accumulating foreign reserves, Anani said Jordan earlier shot for $1.2 billion, enough to cover the Kingdom's needs for three months. “But now we have exceeded this target,” Anani, an Upper House member, said.
Anani warned of endorsing the second stage of the draft Sales Tax Law, which is to be debated by the Lower House in its current extraordinary session, saying any increases to the tax will overburden citizens, and “will ultimately lead to higher rates of poverty and unemployment.”
Anani challenged a recent statement by Minister of Finance Michel Marto who said that the growth rate in the first quarter of this year ranged from 3 to 3.4 percent.
“The maximum rate in terms of economic growth we can achieve this year is 2 percent, and any counter statement to this fact is simply hyper-optimism,” Anani, who held several ministerial portfolios, said.
In early June, prior to His Majesty King Abdullah's meetings in Washington with the World Bank president, the bank's Director for the Middle East and North Africa Inder Sud told the Jordan Times> that “the current economic growth rate is good but it is not enough” to propel the economy out of its bottleneck.
Sud said Jordan needs to reach higher growth rates — in the region of 6 percent — in order to offset the population growth rate of an estimated 3 percent.
“It is difficult to reduce the [budget] deficit as long as the growth rate remains below two percent,” Anani said.
He also urged the Central Bank of Jordan to review current interest rates, which he described as negatively affecting economic growth. “The interest rate should be a tool to encourage rather than hinder investments,” said Anani, who holds a PhD in economics.
Anani said administrative reform, a World Bank and International Monetary Fund prerequisite in restructuring programs, couldn’t be achieved without economic growth. “Do the present monetary and fiscal policies serve such a target, the answer is no,” Anani said.
He said that experience has proved that World Bank policies have led to “more poverty” among the countries that have implemented such policies, which included WB-prescribed reforms.
By Tareq Ayyoub
© 2000 Mena Report (www.menareport.com)