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Profound economic challenges and a vision for transformation

Sep 18,2023 - Last updated at Sep 18,2023

The Jordanian economy confronts grave and intricate challenges, epitomised by soaring indebtedness and alarming unemployment rates. This necessitates urgent and audacious actions to tackle these interlinked crises. Jordan's public debt, amounting to approximately 40 billion Jordanian dinars, casts a long shadow over the economic landscape. When measured as a percentage of GDP (114 per cent), it reveals a daunting reality. Economists and policymakers consider a debt-to-GDP ratio exceeding 100 per cent as high, signaling significant fiscal strain and years of lost sustainable development. A debt burden of this magnitude stifles economic growth and curtails the government's ability to invest in vital sectors like education, healthcare and infrastructure. Ineffectively managed debt servicing could severely impact the budget and the allocation of funds for other development projects. What is urgently needed now is a delicate equilibrium between debt servicing and investments in development, as there is no room for further delays.

Addressing the debt predicament is a formidable challenge requiring comprehensive and sustainable strategies. The following measures can be employed to grapple with the debt issue: First, debt restructuring, encompassing extending debt durations, lowering interest rates (a challenge amid global monetary policy tightening), and rescheduling debt where feasible, all aimed at lightening the current financial burden. Second, enhancing government revenues by optimizing tax and fee collection, particularly from individuals (not workers), and enhancing transparency in public finance management. Third, stimulating economic growth, naturally boosting government revenues by raising GDP and generating new job opportunities. Fourth, shifting towards investment, allowing the government to channel additional financial resources into development and infrastructure projects that bolster the economy. Fifth, enhancing transparency to reduce resource leakage and increase public money management efficiency. Sixth, fostering a competitive environment that promotes investment and business growth, thereby boosting revenues and economic improvement. Seventh, a reevaluation of financial priorities, directing spending towards sectors and programmes that foster sustainable development.

As for the persistently high unemployment rate (22 per cent), it remains a major concern and challenge for the Jordanian economy, reflecting a distressed labour force and a significant portion of the population lacking stable employment and regular income sources. This is not merely an economic challenge but also a social and stability concern. Factors contributing to high unemployment rates include insufficient economic growth, technology-driven economic transformation reducing the need for human labour in traditional sectors, and the exacerbating effects of economic and health crises, which have strained the labor market, diminished investments, and amplified unemployment rates. Undoubtedly, high unemployment increases poverty rates, as job seekers lack consistent income, leading to social insecurity and an elevated risk of falling into extreme poverty.

To confront the unemployment crisis, the government must adopt immediate and sustainable measures, including: First, incentivising national and foreign investments in key sectors capable of providing job opportunities, such as manufacturing industries, technology, tourism, transportation, energy, water and agriculture. Second, developing educational and training programmes aligned with modern labor market needs to enhance workers' skills. Third, fostering entrepreneurship and supporting small and medium-sized enterprises (SMEs) to create new job opportunities. Fourth, promoting collaboration with the private sector to generate job openings and stimulate investments.

Jordan finds itself at a crossroads, grappling with formidable economic challenges. The sustainability of high public debt, coupled with elevated unemployment rates, modest growth and widespread poverty, necessitates immediate action. To guide the nation towards a more prosperous future, policymakers must implement prudent fiscal policies, attract investments, and focus on comprehensive structural reforms. Achieving budget equilibrium, fostering economic diversification and addressing the debt servicing issue are among the critical priorities to ensure Jordan's economic stability, long-term growth, and a brighter future for its citizens.

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