Jordan: Striking a balance

While the Jordanian political landscape has been renewed, the new prime minister, Marouf Bakhit is expected to face a number of challenges confronted by his predecessor, Samir Rifai. Some argue he will have even less time to balance the necessity of reinvigorating the economy with the need to meet popular expectations.

On February 1, King Abdullah designated Bakhit to head up a new government, tasking him with implementing broad-based reforms that would result in a more open, democratic and prosperous society. It is not 64-year-old Bakhit’s first time at the helm, having previously served as prime minister between 2005 and 2007, following a long military career – during which he reached the rank of major-general – and then a term in the diplomatic service.

The changing of the guard in the government came after a wave of public demonstrations protesting the slow pace of reform and the increasing hardship caused by rising prices. In the short term, Bakhit may have more success in enacting political reform than he will in improving the economic climate, dependent as it is on global economic environment.

The lack of progress in reforming Jordan’s electoral system, which some critics see as flawed, was a major cause for complaint under the Rifai administration. The new prime minister has been given a mandate by the King to overhaul the country’s electoral laws, ensure that all segments of society are represented fairly and strengthen legislation dealing with the rights of political parties, as well as freedom of information and expression.

So far Bakhit has been credited with making a good start, holding talks with representatives from across the political spectrum to canvas opinions on forming the new government and going as far as to propose that senior members of the opposition Muslim Brotherhood join the government. Though the overture was politely rejected, it was acknowledged as proof that the prime minister was looking to build bridges and develop consensus.

While advancing political reform is expected to be a difficult and lengthy process, it may well be easier than meeting public expectations for the economy. In designating Bakhit as prime minister, King Abdullah charged him with continuing to work towards reforming the economy to provide for a true partnership between the public and private sectors and a fair distribution of development gains.

Again, the assignment is similar to that given to his predecessor, who has been credited with making some headway in bolstering the economy, at least in some areas. Most significantly, the former administration reduced the budget deficit, which had grown to 8.5% of GDP at the end of 2009. A year later the deficit was down to a more manageable 5.3% and draft budget for 2011 – tabled before parliament at the end of last year – projected a further improvement, with the deficit forecast to be $1.5bn, or 5% of GDP.

However, as the administration’s success in taming the deficit was the result of increased revenues due to higher tax earnings, a cutting of expenditure and a tight rein on subsidies payments, this success did not necessarily translate into popularity on the streets.

On February 8, ratings agency Standard and Poor’s (S&P) issued an advisory note on the Jordanian economy, warning that instability would harm the country’s medium-term growth prospects and damage its public finances. In light of the potential for increased pressure on the economy, S&P announced that it was revising the outlook on Jordan’s long-term foreign currency and local currency sovereign ratings to negative from stable.

While at pains to stress the strong rule of law in Jordan compared with other Middle Eastern states and the lower level of perceived corruption, S&P did say that higher spending on subsidies and social services would be a drain on the funds needed for growth-oriented expenditure.

“We believe that the government is unlikely to find savings elsewhere in the budget to enable it to achieve its 5.3% deficit target, as it is our view that there will be a slowdown in government revenues due to weaker growth, and that the current expenditure mix is too rigid,” the agency said, adding that this year’s deficit could be as high as 6.8% of GDP.

The new prime minster faces a high level of expectations in an economic situation that is not entirely within Jordan’s control. Bakhit needs to form a cabinet that will gain the acceptance – if not the support – of Jordan’s diverse political blocs. In addition he needs to get the political reform process back on track and put in place at least some measures to ease economic difficulties for Jordanians, while at the same time keeping the public deficit in check. A shake up, however, is expected to energise the institutional stakeholders working to accelerate the domestic economy in the next few months.