The global economy remains fragile, still grappling with inflationary pressures exacerbated by the ongoing Russia-Ukraine conflict. Additional stress could arise from another war in the Middle East, a key energy-producing region, with far-reaching implications that could spark broader regional unrest and economic instability.
Israel’s war on Gaza has triggered political and economic consequences, extending beyond its borders to impact neighboring countries, notably Jordan. This situation is anticipated to influence various economic aspects, including fuel prices, investment flows, and tourism within the region.
Kristalina Georgieva, Director General of the International Monetary Fund, underscored the detrimental economic impact of the Gaza war on neighboring nations, including Jordan, during her appearance at the “Future Investment” initiative in Riyadh.
The Jordanian government faces a constitutional mandate to submit its annual budget to the parliament by early December. The current regional turmoil, pr
imarily due to the Gaza war, complicates this process. Concurrently, the government is engaged in talks with the IMF as part of its seventh review under the economic reform program.
Officials and economic experts, in discussions with the Jordan News Agency (Petra), emphasized the need for an emergency budget that considers the current regional challenges. This approach would diverge from the traditional budgetary process, ensuring it aligns with the constitutional requirements of the Lower House of Parliament.
Muhammad Abu Hammour, former Finance Minister, in his remarks, highlighted ongoing dialogues with the IMF regarding a new reform program slated for spring next year. He noted the inevitable impact of regional events on Jordan’s economy, particularly affecting tourism, investment, foreign trade, and domestic demand.
Abu Hammour projected a likely downturn in public revenue due to decreased demand and challenges in various economic sectors. This situation may necessitate increased expenditures, particu
larly in supporting security and military services and possibly extending aid to economically affected sectors.
Additionally, strategic reserves of food and oil might require bolstering, alongside potential enhancements to the social safety net, especially if inflation escalates or workers in certain sectors face hardships.
He stressed the importance of Jordan’s budget reflecting the dual challenge of economic and security issues, given its proximity to the Palestinian territories. The forthcoming budget should, therefore, focus on continuing economic modernization projects, prioritize spending to improve living conditions, and foster development partnerships with the private sector. Moreover, compensatory measures for any revenue shortfalls should be considered.
Abu Hammour downplayed the immediate need for an emergency budget, suggesting that solutions such as budget transfers or emergency expenditures could address additional spending needs, in line with existing legislation.
He also reminded of the in
herent strengths of the Jordanian economy, which historically has shown resilience in adapting to various challenges.
Former Deputy Prime Minister for Economic Affairs, Jawad Anani, highlighted the current need for setting priorities to sustain job creation and provide economic security in emergencies. He emphasized the criticality of focusing on key sectors: energy, food, medicine, water, and support for the armed forces and security services, which should be reflected in the general budget.
Khalil Haj Tawfiq, head of the Jordan and Amman Chambers of Commerce, urged the development of multiple budgetary scenarios to mitigate any economic impacts stemming from the war in Gaza. This approach, he argued, would signal to investors and citizens the economic acumen of Jordan in navigating regional developments.
He warned of significant revenue losses, particularly from the tourism sector, which previously contributed nearly $5 billion, and the potential downturn in investment inflows due to regional instability
.
Historically, Jordan has responded to regional turmoil with adaptive fiscal strategies, such as the emergency budget implemented during the American war on Iraq in 2003 by the government of Prime Minister Faisal Al-Fayez.
Noah Shiyab, Commissioner on the Board of Commissioners of the Telecommunications Regulatory Commission, called for liquidity injections and development projects to stimulate production and reduce unemployment, emphasizing the need for a proactive economic strategy in light of the ongoing war in Gaza.
Economic analyst Salama Darawi echoed the sentiment, urging the Jordanian government to prepare an emergency budget to counter both current and prospective challenges. He highlighted the importance of allocating funds for national defense and security, suggesting a comprehensive re-evaluation of budgetary items to eliminate non-essential expenditures.
Jordan’s government debt stood at $44.6 billion as of last August, comprising 88.7% of the nation’s GDP, with a budget deficit of $1.6 bill
ion in the first eight months of 2023.
Source: Jordan News Agency