OBG talks to Ibrahim Saif, Minister of Planning and International Cooperation (MoPIC)

Interivew: Ibrahim Saif

What impact could the $5bn Gulf Cooperation Council (GCC) grant have on the Jordanian economy?

IBRAHIM SAIF: Over the past few years, Jordan has suffered from successive shocks that have negatively affected its macroeconomic situation. The global financial crisis and the regional situation as a result of the Arab uprisings have had an adverse impact on its growth, fiscal balance and balance of payments. The Syrian conflict has also impacted key economic sectors and continues to pose a serious risk to growth.

The grant of $5bn pledged by the GCC countries – $1.25bn each from Kuwait, Saudi Arabia, the UAE and Qatar – presents an opportunity to spur growth in the country and support the government’s capital investment projects over a five-year period, while also providing the needed financing to move forward with a number of new strategic projects. The grant is expected to boost economic growth by improving infrastructure, expanding domestic demand and creating links between many sectors in the economy.

Growth over the past two years has stemmed from the onset of a large fiscal consolidation programme. Real GDP growth reached 2.8% in 2013, on par with 2.7% in 2012 and 2.8% in 2011 yet still low compared to the 6.5% average during 2000-09. The sectors that saw robust activity included those catering to Jordanian consumption and the basic needs of Syrian refugees. The capital spending boost the fund provides will be instrumental to stimulating our economy in these challenging times. Economic activity is expected to accelerate in 2014, boosting GDP growth to 3.5%.

Which areas need investment most in Jordan? Will the fund be divided up accordingly?

SAIF: The GCC grant was distributed among a number of priority sectors, financing more than 114 ongoing and new projects in the budget law that will help improve service delivery and boost economic activity. About 63.5% of it will go to ongoing capital investment projects in the budget, and the remaining 36.5% will help finance new strategic projects in energy and transport. This will accelerate the implementation of projects and enable ministries and public institutions to improve and expand basic services, while also ensuring equitable distribution of these services among different governorates, thus reducing regional disparities.

The transport sector received 30% of the grant for upgrades to road and transport networks, which are essential to trade and to attracting investment. The energy sector received 20% for projects that will diversify Jordan’s energy mix, which is critical to building resilience and improving the country’s balance of payments and public finances. Another vital sector is water, where about 11% went to projects aimed at introducing new water resources, improving the water supply and reducing water loss from the networks. The education and health care sectors each received 11%, with a focus on improving and expanding public services. The remaining allocations were directed to the government’s Executive Governorates Development Programme and projects in the local development sector, with the aim of improving basic services and existing infrastructure, and promoting economic opportunities.

How has the GCC fund changed the ministry’s role?

SAIF: One of MoPIC’s mandates is to be the focal point for donors, international organisations and international finance institutions. This entails negotiating, coordinating and managing foreign aid (grants, loans, technical assistance) and following up on the implementation of donor-funded projects and programmes.

One such programme is the GCC grant, which the prime minister has appointed MoPIC to manage and oversee. A management unit was created to supervise its implementation and ensure that these funds are speedily and effectively used. This unit, chaired by MoPIC, includes members from its own relevant departments and from the Ministry of Finance and the General Budget Department, who all meet regularly to review the programme’s progress and make decisions.