Will Jordan graduate from the IMF school?
In his recent lecture, Prime Minister Ali Abul Ragheb gave his attentive audience some good news: "The three-year economic adjustment program, agreed upon with the International Monetary Fund (IMF), will come to an end by the end of 2001; after that date we shall become free to decide the level of deficit in our future budgets."
What the prime minister meant is that the IMF will not be breathing over our shoulder any longer and forcing us to reduce our budget deficit year after year as we have to do now.
The "freedom" which the prime minister has in mind is of course the freedom to increase deficit. It is obvious that reducing deficit does not need freedom, it needs the will to do what is right. The IMF did make it a condition that the deficit in the budget should be reduced by one percentage point of the gross domestic product (GDP), but it definitely would not have raised any objections had the government decided to reduce deficit by more than the set target, as any governments committed to economic reform may have done.
The prime minister volunteered to give evidence that prudent fiscal policy, and the drive to achieve a higher degree of financial independence and self-sufficiency could not have existed had it not been for the conditions set by the IMF. The government stands ready, at any time, to go back to the policy of increasing public expenditure depending on borrowing locally and internationally to finance a ballooning deficit, as had happened on a large scale during the 1970s and the 80s, when the country slipped into the swamp of foreign indebtedness, default, depreciation of the local currency and finally knocked at the door of the IMF for rescue.
Until now, we have been deceiving ourselves to believe that Jordanian governments in the 1990s were keener to reform the Jordanian economy and get rid of distortions and imbalances than the IMF is. We were also naive enough to believe that our governments actually undertook to reach a state of affairs whereby the country would become financially self-sufficient and reduce dependency on grants. We even thought that even if the IMF did not prescribe (impose) specific reform measures to our national economy, we would have imposed these measures ourselves voluntarily.
The duration of the present economic adjustment program is three years, ending in 2001, but the reform process is by no means completed. The debt burden is still too heavy to service without relief coming from satisfied creditors, the deficit in the budget is too large to be covered without substantial foreign grants, the privatization program is still incomplete, the restructuring process of certain sectors has hardly begun, and several laws and regulations need to be modernized, if not overhauled.
In case the Jordanian governments do not have the necessary will to push ahead with the economic reform process without external prodding, the need will arise, once more, to extend the IMF program for three more years, starting with 2002, to achieve the desired targets; otherwise, any lenient government coming to power could write off all the reforms that were made the hard way with heavy popular sacrifices during the past 10 years.
We were always hopeful that Jordan will finally graduate from the school of the IMF as early as possible and be on its own, on the understanding that our governments have learnt the lesson and reached a degree of economic maturity. Unfortunately, it seems that they are still under age when it comes to economic policy; they don't move forcefully in the right direction unless they have to, under pressure. — ( Jordan Times )
By Fahed Fanek
© 2001 Mena Report (www.menareport.com)
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