Country Report Jordan February 2011

Economic policy: Fiscal policy is blown by political winds

Jordan's fiscal policy showed signs of unravelling in January as rising complaints about fuel and food prices forced concessions from the government. When he presented the budget to parliament in late December, the then finance minister, Mohammed Abu Hammour, was positive on reducing the deficit while still promoting growth in 2011. However, following the protests, the government produced two economic packages in short measure that will cost the Treasury an estimated JD460m (US$649m) in 2011 alone and may force a rethink of its spending priorities. There were calls for the reinstatement of the Ministry of Supply and the introduction of price controls, measures that would push the country back to protectionist policies while doing little to boost economic activity.

An IMF statement issued on January 9th following a visit to Jordan in December suggested that it was in accord with the government's approach to fiscal management and its expected outcomes. The IMF suggested that the deficit was likely to narrow to 5.3% of GDP in 2011 and supported Jordan's goal of reducing the overall deficit by between 0.5% and 1% of GDP per year, with the aim of bringing it down to about 3% of GDP over the medium term.

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