Time to evaluate IMF programme

On the occasion of the International Monetary Fund’s current economic and fiscal reform programme coming to an end, this may be the right time to take a critical look at the economic and financial developments that took place during the three-year venture, agreed upon with the IMF in 2012. 

On the outset, one should realise that evaluating the performance of the programme based on the behaviour of economic and financial indicators will not be proper because it will be based on the unfounded assumption that all changes the indicators witnessed during the three-year period are the result of the programme.

Under this logic, if these indicators improved, that will be proof that the programme was a success, and if they worsened, this will be conclusive evidence that the programme was a failure, not withstanding other factors.

It is, of course, true that the programme has an impact on most if not all economic indicators, but it is not the only factor. There are other circumstances and reasons that should not be ignored, such as the Arab Spring, the conflicts in Syria and Iraq, the huge drop in global petroleum prices, the fluctuations in foreign grants, and last but not least, the quality of the economic and fiscal management conducted by the government that may or may not be in line with the programme.  

Among the indicators that gave positive readings during the 2012-2015 period are: reduction of the budget deficit in a tangible manner; the continued positive growth of the gross domestic product, albeit at a low rate; the reduction of the deficit in the current account of the balance of payments; the slight rise in expatriates remittances; and the rise of the Central Bank’s gold and foreign exchange reserve, which works as a cushion to protect the economy from shocks.

On the negative side we find that the unemployment rate remained hovering at around 12 per cent; the public debt continued to rise, not only in absolute figures, but also as a percentage of GDP; while at the same time the foreign exchange component of the public debt rose, not a desirable outcome.

Going through the above indicators, one can see that the positive side outweighs the negative side, suggesting that the programme was generally successful.

In this respect, we should keep in mind that this IMF programme was formulated when the Arab Spring was at its peak. At that time the objective was not to achieve economic miracles, but to maintain stability and protect the economy from collapse.

Let us also remember that the three-year programme was not dictated by the IMF, it was prepared by the government and submitted to the IMF for approval and overseeing the implementation process.

The government in 2012, when the programme was issued, as well as the present government are not in need of IMF guidance on what should be done. What the government was after is not getting IMF directions, sometimes called dictates. It wanted to show donors and lenders that the Jordanian economy is healthy and going in the right direction and, accordingly, it deserves confidence, more grants and credit facilities. On this criteria, and taking the regional circumstances into consideration, one can argue that the programme was a success and that cooperation with the IMF should continue.