Jordan hopes to diversify its energy sources and boost growth on back of better ties with Iraq
Prime minister Omar Razzaz believes the kingdom's economy could accelerate as much as 5%
Jordan hopes to boost its economic growth up to 5 per cent on the back reconstruction of neighbouring countries and investment in domestic export-oriented sectors, while lowering its swelling public debt by diversifying its energy sources that include an oil pipeline with Iraq and beefing up renewable energy sources, the country's prime minister said.
“Our relationship with Iraq is at an all-time high,” the kingdom’s premier Omar Razzaz said in an interview with The National at the World Economic Forum at the Dead Sea in Jordan.
“We see eye-to-eye with government, this is a win-win relationship on all fronts, mainly economic but also with the security coordination,” the premier said. “Iraq did a great job in defeating ISIS. On the economic front whether it’s in trade, connecting our electricity grids, the oil pipeline and other sectors where Jordan can provide a lot of know-how, there is a lot of progress that can be made.”
Iraq is looking to export up to 1 million barrels of oil a day through a pipeline that will run from Basra to Aqaba on the Red Sea. Jordan imports about 95 per cent of its energy needs and the pipeline will provide an economic buffer to the country which has been vulnerable to oil price volatility.
“We think the pipeline is very important for both countries,” Mr Razzaz, a former World Bank director, said. “It diversifies our sources of energy and the possibility of trade. The latest I’ve known, it will take about three years to get this pipeline completed and to start the pumping. We took the very first steps and both sides are looking at the procuring, the design and services of construction.”
The kingdom continues to look to Egypt as a primary source of gas after shipments were disrupted throughout the Arab uprisings because of repeated attacks by militants on the gas pipeline.
“The best source in the short term is Egyptian gas. We have doubled the amount of gas imported from Egypt in 2019 compared to 2018,” the premier said.
In 2018, the two countries modified a 2003 agreement to change the amount of gas exported by Egypt to 150 million cubic feet of gas to Jordan a day, which covers about half of the kingdom’s needs.
“We do need a consistent supply gas to Jordan. These are hard lessons that we’ve learned over the years; you need to diversify your sources of energy and achieve energy security for Jordan,” he added. “We have relied on one source for too long a time and then it got disrupted. The most important thing for us in the medium- to long-term is to switch to renewable energy and to local Jordanian sources. That’s happening at a good pace in 2019.”
The financial burden of hosting 1.3 million Syrian refugees continues to weigh on the kingdom, which has no natural resources and has historically financed its deficits through grants and soft loans. Supporting refugees costs Jordan $2.5 billion (Dh9.18bn) a year, the prime minister said.
“Countries have come forward and helped with part of that, but unfortunately Jordan has never covered the $2.5bn that it costs it to support the refugees, there is always a gap and some years its huge,” Mr Razzaz said. “We’re a bit worried about donor fatigue setting in, but I have to say the last Brussels conference for supporting countries that are hosting refugees has provided good support for Jordan.
"We are always hopeful that more countries will see this as a global good that Jordan is providing and will want to bear their share of the burden.”
The kingdom adheres to the voluntary repatriation of refugees. Some 7,000 Syrians have returned to their country in the last couple of months, Mr Razzaz said.
Jordan hopes to ease the financial burden and reduce its debt to GDP ratio, which is about 95 per cent, by focusing on boosting the pace of economic growth and promoting export-oriented sectors in the country that are related to technology and services. The International Monetary Fund projects the kingdom’s economy will grow about 2.5 per cent, the prime minister believes that number can be higher.
“The debt to GDP can be reduced in two ways: either you reduce your stock of debt, which would require countries of the region and the world and relieve some of the debt, or it can happen by growing your economy faster and the ratio will go down,” said Mr Razzaz.
“We are counting on the most likely which is growing the economy, investments, the faster we grow the economy the more sustainable the debt to GDP will be. We’ve been growing at 2 per cent plus or minus over the last three, four years, under the right circumstances we can easily double or triple that number.”
The opening of borders with neighbouring countries and the region moving towards reconstruction, coupled with investment in sectors in Jordan that are export-oriented, is seen as a boon to the kingdom’s economy.
Economic growth of “4 or 5 per cent is within reach if we get all the elements into place, [but] this is not a magic wand,” he said.
The kingdom has about 1bn Jordanian dinars (Dh5.18bn) in debt due in 2019, and may look to finance it through the local market, eurobonds or concessional loans, he said.
Updated: April 7, 2019 09:29 AM