Economic urgency requires a shift

There is a growing interest by American media directed to the Middle East, like Al Hurra TV and Sawa Radio, in the economic situation in Jordan. The same interest was also reflected in Israeli newspapers and some Lebanese TV outlets.

The sudden attention was brought to focus by the testimony of both Deputy Prime Minister and Minister of State Rajai Muasher and Minister of Finance Ezzeddine Kanakrieh to the Lower House's Finance Committee.

Both ministers sent warning signs that Jordan’s actual revenues in the first half of 2019 fell way short of the projected numbers included in the Budget Law.

The two major reasons attributed to this revenue shortage were the revenues from cigarette sales and increasing bread subsidy, which is projected to reach JD270 million by December 31 of this year.

No one should be surprised by the decline in revenues. The new Income Tax Law, which pushed tax rates higher, failed to generate the expected revenues. People felt that the government is overtaxing them and they responded by exercising tax avoidance.

Moreover, the government based its income and sales tax intake on the assumption that the current rate of growth would be 6.5 per cent (2.5 real and 4 inflation). The drop in the purchasing power of households and the growth down to 2 per cent in real growth dampened such expectations.

What happens is that the emigration-prompted growth witnessed in the previous years during the Arab Spring has disappeared in 2019. Moreover, there was a relatively large capital flight not only by business firms, both foreign and domestic, but also by households purchasing property abroad.

Besides all of that, unemployment rose to 19.3 per cent and still rising, poverty is almost 16 per cent and rising, and the rates of growth and capital accumulation are going down.

We can develop a conspiracy theory based on unpredictable political upheavals in our region and the world at large. But until we put our economic affairs in order, develop a new paradigm and focus on real issues, we do not have the luxury to blame others.