JORDAN Public Disclosure Authorized
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RESTRICTED Report No. AS-98b Public Disclosure Authorized This report was prepared for use within the Bank and its offiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized RECENT DEVELOPMENTS OF THE ECONOMY OF JORDAN Public Disclosure Authorized October 23, 1963 Public Disclosure Authorized ,Jepartment of Operations South Asia and Middle East CURRENCY EQUIVALENTS I Jordan Dinar = 1 Pound Sterling = 2. 80 U. S. Dollars 1 U. S. Dollar = 0. 357 Jordan Dinars 1 Million JD = $2, 800, 000 1 Dunum = 1, 000 square meters (0. 1 hectare) or 0. 247 acres To Damascus and Beirut L ake Tiberlos S Y R l A rbid e n n Tulkar AunMafraq Jarash o9 Nablus Zra H S Salt Suweileh Zerqa Ruseifa ýamallah eAMMAN Jericho Jerusalem. Kallio Madaba Bethlehem Hebron * -S A U D I Karak AR A B I A -J Taf il a /* El Hasa JORDAN RAILWAYS Pera ' i i Existing ++++++ Disused Ma'an > To be constructed X-ASPHALT ROADS EAST GHOR CANAL Naqb Ashtar 0 0 20 30 40 50 60 MILES o Medina MARCH 1963 BRD-799R CONTENTS Page BASIC STATMSTICS i SU12VIARY AND CONCLUSIONS I. THE ECONOIf1 II, RECENT ECONONIC TRENDS AND GROWTH 4 Agriculture 4 Mining and Industry Tourism III. INTERNAL AND EXTERNAL FINANCE 6 Public Finance 6 External Receipts and Payments 8 Growth of Foreign Reserves 9 Money and Banking 9 IV, DEVELOPMENT FROBLEM AND NEEDS W FUTURE IROSPECTS 13 Progress of Economic Development 13 Development Plans 14 Administrative and Institutional Improvement 18 Financing Development and Aid Requirements 19 Balance of Payments Prospects 20 1 BASIC STATISTICS Area: 96,000 kilometers(37,500 sq. miles) Of which cultivated 5,000 to 6,000 square kilometers Irrigated lands 604 square kilometers Dry land farming 4,600 to 5,600 square kilometers Population: Total population (1962 estimated) 1,800,000 Of which refugees (estimate) 550,000 Rate of natural increase 2.5% to 3% per year Foreign Trade 1962 (Customs Statistics): Imports JD 45.6 mil11ion Of which: Agricultural products 14.2 Textiles 6.0 Capital Goods 6.8 Raw materials and semi-finished goods 9.5 Others 9.1 Domestic Exports: JD 4.9 Of which: Agricultural products 2.9 Phosphates 1.5 Balance of Payments (JD Million) 1955 1959 1961 1962 Imports 25.3 39.4 40.9 3,5 Exports 3.6 3.4 55.3 3 Trade Deficit 21.7 36.0 35.6 37.6 Invisibles (net) 3.9 3.1 4.8 8.2 17.8 32.9 30.8 29.4 Private Donations 1.7 5.8 7.0 ,9 16.1 27.1 23.8 21.5 Official Grants and Loans 16.7 25.6 25.0 2 + 0.6 - 1.5 + 1.2 2.2 Other capital inflow and errors and omissions 1.8 1.0 1.7 h*5 Increase (+) or decrease (-) + 2.4 - 0.5 + 2.9 +6.0 in gross foreign exchange reser-ves i1 Foreign Exchange Reserves (JD Million) End of End of End of June 1963 1957 1960 1962 _ With Currency Board 15.6 16.4 20.2 22.4 With Commercial Banks 1.2 14.3 20.3 l44 With Government 1.0 3.2 Total gross 26.8 31.7 40.5 40.0 Foreign liabilities 3.5 5.5 7.5 11.4 Total net 23.3 26.2 33.0 28.6 Public Finance (JD Million) 1955/56 1959/60 1961/62 1962/63 Budget 1963/64 (preliminary actuals) Domestic Revenue 8.0 12.3 14.7 20.8 17.2 Foreign grants and loans to Government 10.9 18.4 18.9 17.9 20.4 Total Revenues 18.9 30.7 33.6 38.7 37.6 Expenditures on defense and security 10.3 17.9 18.5 19.2 21.1 Other ordinary expenditures 4.6 8.1 9.6 11.7 13.0 Extraordinary expenditures (mainly for development) 2.8 4.7 4.9 7.8 9.5 Total expenditures 17.7 30.7 33.0 38.7 43.5 Currency and Banking (JD Million) End of Endof End of June 1963 1957 1960 1962 Currency in circulation 14.7 15.6 19.1 21.4 Private demand deposits 1/ 7.5 10.5 14.4 15.9 Total money supply 22.2 26.1 33.5 37.3 Public deposits with Banks 9.2 14.7 19.4 13.0 Private deposits with Banks 9.8 12.8 19.8 21.6 Total deposits 19.0 27.5 39.2 34.6 Bank credit to private sector 10.0 15.8 20.3 23.3 1/ Including public entities. 111 Summary i. No basic changes have occurred in Jordan's economic situation since the last IDA mission visited the country early in 1961. While the whole economy has remained geared to foreign assistance, a fairly satis- factory rate of growth has been maintained without giving rise to any serious inflationary pressures. The industrial sector is still very small. In agriculture, production of cereals, which is largely dependent on erratic weather, has not improved, but production of fruits and vegetables has nearly doubled over the last few years. Irrigated lands have been further ex- tended by the completion of two sections of the East Ghor Canal. Foreign exchange earnings, derived mainly from tourism, agricultural produce and phosphates, have nearly doubled over the past three or four years, but still cover only about one quarter of the import bill. ii, Jordan has an annual per capita product varying between 4150 and $19. With the addition of foreign aid and private remittances, which to- gether are equal to about one quarter of the national income, total re- sources of the economy amounted in 1961, a good crop year, to $245 per capita. Almost 90 per cent of the available resources are consumed, nearly 70 per cent by the private sector and over 20 per cent by the public sector. Most of the additional resources over the past few years have gone into public and private consumption, and the ratio of gross investment to national product has declined somewhat. Public investment absorbs only about 4-5 per cant of total resources. A serious attempt is now being made, however, to step up the rate of investment. iii. Early in 1962 the Government prepared a Five-Year Program now in the process of being revised into an Eight-Year Program, running until 1970/71. The tentative level of public investment proposed, but not finally decided, amounts to JD 116.5 million, or an average of JD 14-15 million per year. Although the Government has recently introduced a series of reforms designed to improve standards of public administration, Jordan's administrative capacity might still constitute a bottleneck in the execution of so large a program. However, even if the program is reduced so as to concentrate on the major projects in agriculture and mining, a large effort will be needed to mobilize greater domestic resources. The Government is accordingly aiming to cover an increasing share of current public expenditures out of its own revenues, thereby releasing foreign aid for financing development. Foreign assistance has levelled off at about JD 18-19 million a year. The aid-giving countries intend to reduce gradually the budget support to the Government, entirely absorbed by defense expenditures, and to concentrate more on de- velopment assistance. iv. Rising public expenditures on both current and capital account have been reflected in a decline in the Government's deposits with the banking system, which have decreased from JD 16.4 million in the middle of 1962 to JD 8.5 million at the end of June 1963. Commercial liabilities abroad appear to have increased simultaneously. Net foreign exchange re- * serves rose substantially in 1961 and 1962, but fell by over JD 4 million during the first half of 1963. On June 30 of this year they amounted to JD 28.6 million, sufficient to cover about eight months' imports. iv v. The inherent weaknesses of the Jordanian economy, the acute unemployment problem and the high level of defense expenditures make it essential that the country should continue to receive large amounts of external assistance if it is to make progress with economic development, so that in time it can reduce its dependence on external support. Though Jordan's public foreign debt is only about JD 10.5 million, (excluding the obligation towards the UK) and involves an insignificant service burden, the country cannot afford at present to finance its investment program with loans on conventional terms. I. THE ECONONY 1. The Hashemite Kingdom of Jordan has a population of 1,800,000 including about 550,000 Palestinian refugees. The population is believed to be growing at an estimated 2.5 per cent to 3 per cent a year. The country consists of the former Kingdom of Transjordan and what was until 1950 the eastern part of Palestine. Transjordan had been largely a pastoral country shared by Bedouin tribes and subsistence farmers. The part of Palestine which is now West Jordan incurred a severe blow when its ties with the rest of Palestine were cut, involving the need for a complete and radical over- haul of its transport system, the loss of traditional markets, drastic re- duction of employment opportunities and disruption, in certain areas, of public utility services. The influx of the Palestinian refugees, though bringing into the new Kingdom some skill and even a little capital, accen- tuated its problems.