Government’s Role as a Partner

The government has undertaken short, medium and long-term programs aimed at increasing economic growth through the enhancement of productivity based on positive social development through the expansion of an already advanced physical and human infrastructure. The programs emphasize both public and private sector involvement and partnership, and the growth of international and inter-regional trade, strategically managed within a framework of sustainable development.

In April 1989, Jordan signed a five-year structural readjustment package with the International Monetary Fund (IMF) with the goal of restoring sustainable growth, curbing inflation, stabilizing the Dinar's exchange rate, and reducing internal and external financial imbalances. The first phase of the economic reform program resulted in a strong positive turnaround in the country's economic performance. However, the program was interrupted due to the Gulf Crisis of 1990-91 and its aftermath, as Jordan became faced with a challenge to act quickly in order to deal with sudden, sizable imbalances in the economy. The second phase was designed to deepen and expedite the reform process. In October 1991, the government concluded a new seven-year economic adjustment program with the IMF, designed to improve Jordan's balance of payments, reduce inflation, shrink the public sector's share of GDP and boost real GDP growth.

In addition, a five-year economic and social development plan for 1993-97 was drafted as a tool for a new developmental strategy. The plan designated a major role for the private sector, and confined the role of the government mostly to infrastructure-related projects that are essential for stimulating private investment. Jordan implemented a plan designed to rectify imbalances and bolster the long-term stability of the Jordanian economy through the following:

• redefining the role of the state and enhancing the role of the private sector;
• encouraging export-oriented investment and production as the primary vehicle for economic growth;
• limiting the expansion of liquidity and money supply;
• stabilizing the exchange rate of the Dinar;
• reducing the level of foreign debt to GDP;
• increasing the attractiveness of Dinar-denominated savings over other currencies;
• increasing Jordan's foreign currency reserves to cover imports for at least three months;
• shifting revenue generation from an income-based to a consumption-based tax scheme to encourage saving and investment, while eliminating taxation on investments and savings;
• removing market distortions that may arise from price-fixing agreements and monopolies, reducing and restructuring subsidies and dismantling trade barriers;
• providing incentives for savings and investments, and encouraging foreign investment;
• liberalizing the flow of trade and capital while actively pursuing regional and global integration; and,
• addressing the social dimension of development through systematic plans for the alleviation of the twin problems of poverty and unemployment.

The forthcoming third phase builds upon past accomplishments to further consolidate and expand the reform programs. These programs, which will also be underscored in Jordan's forthcoming National Economic and Development Strategy, will add momentum to the ongoing plans.