Having just signed up to yet another IMF assistance program, isn’t it about time we began relying less on the international lender and more on our own government to tackle deep-rooted economic problems?
It took Jordan almost 16 years to graduate –or exit– from its first IMF stabilization and structural adjustment program back in the early 1990s. However, it took us less than six years of poor policies to start a new course of adjustment arrangements with the IMF, hoping that we only need few corrective actions and housekeeping policies in order to go back on track and become a sound stable economy.
The stand-by arrangement, which ended in August 2015, nevertheless, ended up with no substantial corrections, except for reducing the budget deficit as a result of contractionary policies, leaving the country with more debt, a slower growth rate, and more unemployment.
It’s fair to say this isn’t the direct fault of the IMF program. Rather it was due to the poor performance of the previous government, which focused more on cost cutting and the lifting of subsidies than inducing investment and creating jobs, or even spending the funds it received on growth and development drivers.
To this end, the new government, which I believe has a better economic team and a very good chance to shift towards real supply side policies, needs to be brave enough to make difficult decisions concerning tax hikes or more cost cutting policies.
Although most of the new decisions of the current government have come under increasing taxes on luxury products, the government still needs to take some substantial steps towards a real partnership with the private sector.
No one today can argue against a new program with the IMF, which was agreed on last month, in order to get the lender’s coveted seal of approval of our policies and economic track record so that we can approach donors and investors for more funds and injections in the economy.
But the question we need to ask is if we are ready for a long chain of IMF analgesic programs, or is it about time to undertake real structural change that allows us to revitalize the economy towards sustainable growth policies and exit more debt attraction programs. The current government can do a lot in terms of partnering with the private sector, as the executive program that the government sent to HM King Abdullah says that this isn’t a stop-gap government, rather than one that he’s counting on to endure and deliver. If so, I expect the government to immediately form a special economic committee in order to articulate a genuine economic salvation program that contains both quick fixes and more strategic policies.
Such a committee should comprise members and experts from the private sector, public sector, as well as civil society. Finally, it’s important to reiterate here that raising taxes on certain luxury products might please the IMF and could even attract some more foreign debts or financial assistance, but even the short memory with the previous government showed that this will never induce growth or move the economy forward. The only thing that could help and create jobs is to work with the private sector and investors to design job creation programs. Finally, it’s really important today to work on genuine programs for funding SMEs and building their capacity as they’re uniquely placed to tackle the Kingdom’s youth unemployment challenge.