Leveraging bad advice - Oct 26,2023

A closer examination of recent and not-so-recent publications from the IMF and World Bank reveals statements like "Jordan's economic transformation remains contingent on identifying opportunities to expand the economy's outward orientation and to implement reforms needed to promote private sector-led growth and job creation." These statements serve as policy guidelines and are deeply ingrained in the current Jordanian development paradigm. However, breaking down these components shows the inherent problems with such vague rhetoric.

Does "expanding the economy's outward orientation" imply that Jordan should become even more open? The trade (exports plus imports) to GDP ratio already exceeds 85%; should it be increased further? But why? The annual trade deficit is over US$12 billion in a US$48 billion economy. Should Jordan intentionally increase this deficit? How would it address the growing trade deficit? It's clear that more openness is not the solution.

What about "private sector-led growth"? Does it mean that the private sector alone will be responsible for growth, while the government remains a bystander or merely changes legislation without taking substantial action? Such a belief is naïve. It's a misconception to think that recovery depends solely on foreign direct investment (FDI), tourism revenue, and remittances, none of which are internally generated. This reliance on external sources is risky, especially in an unstable regional environment.

Israeli hegemonies in Gaza create uncertainty that can negatively impact tourismThe Israeli hegemonies in Gaza create uncertainty that can negatively impact tourism, further reduce remittances, and discourage FDI inflow into Jordan. Relying on these external factors without developing the domestic sector is a dangerous approach. Successful economies like South Korea, the UK, the USA, and China have all thrived by implementing industrial policies and government-led growth.

The World Bank and IMF seem far removed from reality

The World Bank and the IMF seem far removed from reality. Policymakers should not blindly adopt this paradigm. Instead, they should take it with a grain of salt and avoid falling for the lemonade they're selling.

PS: I apologize for not writing this piece exclusively about Gaza, and I am sorry that I talk about economics while my brethren and loved ones are in harm's way a few hundred miles away. It is not because of insensitivity but because the heart hurts—I wish them victory.

Published in Jordan News:

https://www.jordannews.jo/Section-36/Opinion/Leveraging-bad-advice-31814