Despite the neighbouring Iraq war, Jordan's finance ministry was able to implement difficult reforms in 2003, pursuing prudent macroeconomic policies and structural reforms that helped lead to strong export growth, rising international reserves and low inflation. Recent reforms of public employees' pension plans contributed to healthy management of the country's fiscal position, and an accelerating privatization programme should help the country hit its debt reduction targets by 2006. In recognition of these achievements, analysts and bankers voted Mohammad Abu-Hammour as Emerging Markets' finance minister of the year for the Middle East.
EM: How has the Jordanian economy weathered the war in Iraq?
A-H: The Jordanian economy was adversely affected by the Iraqi war. Before the war, Jordan used to receive about $500 million annually from Iraq through discounted oil. Tourism to Jordan was disrupted. Real GDP growth dropped from 4.8% in 2002 to 3.2% in 2003 due mainly to the war. The economy appears to be recovering from the impact of the Iraqi war, especially in bilateral trade with Iraq. There was a strong rebound in export growth and a pick-up in domestic demand.
EM: What would you like to see happen in the region, both politically and economically, that would help foster Jordan's economic health?
A-H: I would like to see peace prevailing in the region. Economic growth is sustained and enhanced in a peaceful and stable environment. International financial aid to the region would certainly contribute to the improvement in the standard of living of the people of the region.
EM: Which sectors have been most important to the recovery of the Jordanian economy over the last year?
A-H: The finance, insurance, real estate and business services sectors have been the most important sectors in terms of contribution to GDP. Their value was JD1,071 million which represented about 17% of GDP. QIZ exports [from the Qualified Industrial Zones, which export goods to the US under a special duty-free arrangement] jumped from $2.4 million in 1999 to $586.6 million in 2003. The QIZ increased the growth of manufactured export receipts from an annual average of 10.4% during the 1990s to 65.9% over the period 2000-2003.
EM: What is the biggest economic challenge Jordan faces as it looks ahead?
A-H: Raising the rate of real GDP growth to reasonable levels is the biggest economic challenge facing Jordan at present. To combat the problem of unemployment, the GDP growth rate has been raised to a level that exceeds the population growth rate. This will lead to creating new job opportunities. The recently established National Bank extends loans to small and medium-sized enterprises, a matter which is important in coping with the problem of unemployment.
EM: What progress has been made in
Jordan's privatization programmes?
How will this affect the economy
going forward?
A-H: The government has created separate generation, transmission and distribution companies. A new electricity law has been enacted for power privatization through a new regulatory and tariff regime. This process will enhance efficiency and productivity within the Jordanian economy. Other privatization programmes include the government's plan to sell a majority of its shares in the Jordan Phosphate Mines Company to strategic investors and part of its shares in the Jordan Telecommunications Company. The government will also sell the Jordan Post Company to a strategic partner.
EM: How are you approaching the management of Jordan's debt profile?
A-H: Our thinking regarding the management of debt is based on the following:
? Reducing the dependence on external debt and depending more on domestic debt
? Concluding more debt swap agreements with the concerned creditors
? The issuance of the Public Debt Management Law in 2001.
This thinking is leading to the strengthening of the domestic capital market as well as the absorption of excess liquidity at local banks.
Steps to achieve the debt limit under the Public Debt Law include:
? No government provision of financial guarantees to any party
? Borrowing for the projects that are included under the budget only
? Concluding debt swap agreements with a number of Paris Club members
? Using the privatization proceeds to reduce the debt
? Reducing the budget deficit and raising the GDP growth rate.
Domestic debt shall not exceed 60% of GDP and external debt shall not exceed 60% of GDP by 2006; total debt shall not exceed 80% of GDP.