Jordan’s high and rising public debt has worried the International Monetary Fund and prompted a downgrade from Standard & Poor’s. So the government is planning a blast of austerity by year-end.

Tax hikes and subsidy cuts —- likely to be highly unpopular —- are on the agenda as the country’s debt to GDP ratio has reached a record 95 percent, from 71 percent in 2011.

“Postponing problems might increase the popularity of the government but would be a crime against the nation,” Prime Minister Hani Mulki told a group of parliamentarians this week.

After an IMF standby arrangement that brought some fiscal stability, Jordan agreed last year to a more ambitious three-year program of long-delayed structural reforms to cut public debt to 77 percent of GDP by 2021.

The debt is at least in part due to successive governments adopting an expansionist fiscal policy characterized by job creation in the bloated public sector, and by lavish subsidies for bread and other staple goods.

It also hiked spending on welfare and public sector pay in a move to ensure stability in the aftermath of the “Arab Spring” protests in the region in 2011. But the economy has slowed, battered by the turmoil in neighboring Syria and Iraq.

The economic strains reduced local revenue and foreign aid, forcing Jordan to borrow heavily externally and also resort to more domestic financing.

Although there has been some progress this year with improving remittances, tourism and some rebound in exports, there has been no pickup in growth since 2015 — with the officials forecasting 2 percent growth this year from an earlier IMF 2.3 percent target.

“This year we are at a crossroads. Everything I am trying to do is to stop the hemorrhage and start breathing,” Mulki was quoted as saying at another meeting to garner support.

The rising debt accentuated by the protracted regional conflicts on Jordan’s borders was the main reason Standard and Poor last week downgraded its sovereign rating to B+.

Subsidy risk

Economists said Jordan’s ability to maintain a costly subsidy system and a large state bureaucracy was increasingly untenable in the absence of large foreign capital inflows or infusions of foreign aid, which have dwindled as the Syrian crisis has gone on.

Jordanian officials say they expect less donor support next year than any time since the crisis began. They are also concerned that Gulf states, hit by lower oil prices, have so far not committed any support funds given after the “Arab Spring” to be renewed.

Politicians and economists say the government’s fiscal consolidation plan envisages a doubling of bread prices and raising sales taxes on basic food and fuel items.

This should cut into the estimated 850 million dinars ($1.2 billion) the government pays in annual subsidies from bread to electricity to water.

But economists reckon subsidy cuts are bound to worsen the plight of poorer Jordanians, a majority of the country’s population, and removing subsidies has triggered civil unrest in the past.

As well as debt, the IMF has also pointed to the unemployment rate, which has risen sharply in the last two years to 16 percent, and to low tax collection.

The IMF says Jordan stands out among countries in the region with among the lowest tax collections. Personal taxes constituting only 0.4 percent of GDP, with nearly 95 percent of the population not subject to income tax.

Critics say any hikes would extract more from the segment of salaried employees that already pays while leaving influential business tycoons outside the tax net.

“The tax burden in comparison with countries of the region except the oil producers is low… there is big generosity in exemptions,” said Jihad Azour, the IMF’s director of the Middle East and Central Asia department during a recent visit to Jordan.

Economists fear that the IMF’s tax recommendations endorsed by the government that range from expanding corporate income tax to dividends and tougher sanctions for tax evaders will hurt business sentiment in a country whose political stability has turned it a safe haven.

“It’s important to activate growth to bolster stability and ensure a faster drop in debt,” said the IMF’s Azour adding that tackling Jordan debt problem was crucial for its future prosperity in a turbulent region.
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An unprecedented Chinese financial and construction effort is rapidly developing Pakistan’s strategically located Arabian Sea port of Gwadar into one of the world’s largest transit and transshipment cargo facilities.

The deep water port lies at the convergence of three of the most commercially important regions of the world, the oil-rich Middle East, Central Asia, and South Asia.

Beijing is developing Gwadar as part of the China-Pakistan Economic Corridor, known as CPEC. The two countries launched the 15-year joint mega project in 2015 when President Xi Jinping visited Islamabad.

Under the cooperation deal construction or improvement of highways, railways, pipelines, power plants, communications and industrial zones is underway in Pakistan with an initially estimated Chinese investment of $46 billion.

The aim is to link Gwadar to landlocked western China, including its Muslim-majority Xinjiang region, giving it access to a shorter and secure route through Pakistan to global trade. The port will also provide the shortest route to landlocked Central Asian countries, including Afghanistan, through transit trade and offering transshipment facilities.

Chinese fuel imports and trading cargo will be loaded on trucks and ferried to and from Xinjiang through the Karakoram Highway, snaking past snow-caped peaks in northern Pakistan.

‘Qualitative change’

Gwadar will be able to handle about one million tons of cargo annually by the end of the year. Officials anticipate that with expansion plans under way, the port will become South Asia’s biggest shipping center within five years, with a yearly capacity of handling 13-million tons of cargo. And by 2030, they say, it will be capable of handling up to 400-million tons of cargo annually.

China has in recent months begun calling CPEC  the flagship project of its global Belt and Road Initiative, or BRI. The “qualitative change” from an experimental project to flagship project underscores the importance Beijing attaches to CPEC, said Zhao Lijian, the deputy chief of mission at the Chinese embassy in Islamabad.

Out of 39 “early harvest” projects under CPEC, 19 have since been completed or are under construction with a Chinese investment of about $18.5 billion, Lijian told VOA. The progress makes it the fastest developing of all of at least six BRI’s corridors China plans to establish, added the Chinese diplomat.

Gwadar is a “symbol of regional peace and prosperity” because it will connect countries around Pakistan to serve their trading interests, said port Chairman Dostain Khan Jamaldini.

Jamaldini dismissed as “not true” concerns that skilled Chinese laborers, engineers and businesses will flood Pakistan, hurting domestic industries. About 65 percent of the labor force on construction and other projects at Gwadar is Pakistani, and the number of Chinese is currently just over 300, he added.

Security concerns and India’s claims over some of the territory crossed by the massive project remain key challenges for Gwadar and CPEC in general. Pakistani and Chinese officials dismiss reported assertions that Beijing is expanding its presence at Gwadar to be able to handle naval ships and military transport planes.

The collaboration has “no strategic or political” aims against a third country, insisted Lijian. He went on to assert that the purpose of CPEC” is to help our iron brother Pakistan” to improve its economy and to strengthen the bilateral relationship.

Pakistani officials have trained and deployed about 15,000 troops and paramilitary forces to guard CPEC-related projects and the Chinese working on them. Islamabad alleges that the Indian intelligence agency has been tasked to plot subversive acts to derail CPEC.

Sleepy fishing town

Gwadar, with a population of around 100,000, mostly fishermen and boat makers, is often referred to as a sleepy fishing town.

The costal city’s poverty-stricken residents are hoping new employment opportunities will be created for them in the wake of the massive development underway in Gwadar.

But their immediate challenges are shortages of clean drinking water and hours long daily power blackouts.

“We are happy Chinese are building port, hospitals, schools and roads but right now we out of power during most of the day and limited water availability,” said fisherman Khalil Ahmed.

The family, like other fishermen in Gwadar, has been plying unspoiled crystal blue waters of the Arabian Sea for decades with age-old fishing techniques and barely surviving on limited income because financial resources do not allow them to buy modern fishing tools.

However, ongoing massive economic activity will “qualitatively” change the lives of its poverty-stricken residents for the better, says Mushahid Hussain, who chairs a parliamentary committee on CPEC.

He says a fisheries processing plant is being installed at the port and arrangements are being planned to train and equip fishermen to improve and export local fish to other parts of Pakistan and China.

Senator Hussain believes economic projects under construction in Gwadar will help its people and address long-running grievances of the province of Baluchistan, where the port is situated.

The poverty-stricken largest Pakistani province has long been in the grip of a low-level Baluchistan separatist insurgency, which mainly stems from demands from the federal government for local control over Baluchistan’s vast natural resources.

Gwadar’s existing 50-bed government hospital is being extended to 300 beds, a technical and vocational institute is being constructed, a 300-megawatts coal-based power plant and a desalination plant are being installed, a new international airport and a six-lane international standard expressway are being built to connect Gwadar port with the rest of Pakistan and neighboring countries, including Iran and Afghanistan.

Local officials say most of the projects, including the new airport, are being built with Chinese financial grants. The rest of the projects in Gwadar and elsewhere in Pakistan under CPEC are being built with “interest-free” and “soft-loans” from China.

 
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The U.S. economy is expected add another 11.5 million jobs by 2026, as an aging population and longer life spans raise the need for health care providers. The total U.S. workforce is expected to grow to 167.6 million people.

Tuesday’s projections come from the U.S. Bureau of Labor Statistics, which says job growth will accelerate slightly from its current pace, but it will not return to the brisk gains seen the over previous decades. The BLS updates its job outlook every two years as new information becomes available.

The percentage of the workforce over age 55 will rise to nearly one-quarter in 2026, a sharp increase from the less than 17 percent back in 2006. People in their 50s and 60s may retire, which is one reason experts expect workforce participation rates (the percentage of working age people who have jobs or are seeking work) to decline.

Over the decade, nine out of 10 new jobs will be in the services sector, particularly health care. Employment by companies that produce goods is expected to grow at a meager one-tenth of one percent a year, with a gain of just 219,000 jobs by 2026.

The workforce is expected to become more diverse as Asian and Hispanic parts of the U.S. population grow more quickly than average. Whoever is in the workforce will find additional education important, as two out of three jobs in the fastest-growing areas require at least some post-secondary education and training.

And the whole economy is predicted to expand at a two percent annual rate. That is faster than the current growth rate, but below the gains seen in previous decades.

 
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Sierra Leone hopes to raise millions of dollars for development projects by auctioning a huge uncut diamond, believed to be one of the world’s largest, in New York in December.

It will be the government’s second attempt to sell the 709-carat gem, known as the “Peace Diamond”, after it rejected the highest bid of $7.8 million at an initial auction in New York in May.

Over half of the proceeds from the sale will be used to fund clean water, electricity, education and health projects in Sierra Leone, and particularly in the village of Koryardu, in the Kono region in eastern Sierra Leone, where the diamond was discovered.

“There’s a reason God gave these diamonds to the poorest people in the world and made the richest people want them. This is Tikun Olam [Hebrew for correcting the world], this is making the world a better place,” Martin Rapaport, chairman of Rapaport Group, a network of diamond companies which will manage the auction, told Reuters.

The diamond, which the auctioneers described as the 14th largest in the world, was unearthed in Koryardu in March by a Christian pastor who gave it to the government.

Diamonds fuelled a decade-long civil war in Sierra Leone, ending in 2002, in which rebels forced civilians to mine the stones and bought weapons with the proceeds, leading to the term “blood diamonds.”
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The U.S. Federal Reserve will raise interest rates in December and twice next year, according to a Reuters poll of economists, who now worry that the central bank will slow its tightening because of expectations that inflation will remain low.

Most respondents expected the nation’s economy to determine future rate hikes, but a change in regime at the Fed could also affect monetary policy.

U.S. President Donald Trump could decide this week whether to reappoint Fed Chair Janet Yellen, whose term ends in February, since he has concluded interviews with five candidates for that post.

“There is a greater-than-usual degree of uncertainty around monetary policy next year, with the Fed’s leadership up in the air,” wrote RBC economist Josh Nye.

A Reuters poll of economists published last week showed Fed Board Governor Jerome Powell getting the top job, although most said reappointing Yellen would be the best option.

Still, a vast majority of the more than 100 economists in the latest poll expect rate hikes to depend largely on how the U.S. economy performs.

“Despite intense speculation about the next Fed chair, the path of policy rates is still likely to be driven primarily by the data, regardless of who is nominated,” said Christian Keller, head of economics research at Barclays.

Forty of the 50 economists who answered an extra question also said the U.S. economy, which is on a steady growth path, did not need a big fiscal stimulus in the form of sweeping tax cuts.

The dollar rose on Friday after the Senate approved a budget proposal for the 2018 fiscal year that cleared a critical hurdle for a tax-cut package.

But the need for such a large stimulus to boost the U.S. economy at this late stage of its cycle, when the jobless rate is at more than a 16-year low, remains questionable.

“The U.S. needs to return to a sustainable fiscal path, and I have little faith that sweeping tax cuts will generate enough growth to put us on that path,” said Bank of the West economist Scott Anderson.

While recent U.S. economic data has improved, the closely watched core PCE inflation measure has been below its medium-term target of 2 percent for more than five years, despite strong employment growth.

The latest poll, taken Oct. 16-23, showed scant expectations of economic growth lifting off from its current trend or of inflation reaching the Fed’s target before 2019.

That has divided Fed policymakers and raised doubts about the pace of further rate hikes, according to minutes from the Sept. 19-20 meeting.

Still, economists predicted the Fed would raise rates 25 basis points to 1.25-1.50 percent in December. All 100 economists polled expect it to keep policy on hold at its next meeting.

The central bank is projecting three more rate increases in 2018, while economists expect only two next year, which would take the fed funds rate to 1.75-2.00 percent.

But about two-thirds of 52 economists who answered an extra question said risks to those forecasts were skewed more toward a slower pace of rate hikes. Fifteen of those respondents suspected there could be fewer than two increases next year.

The remaining 17 economists said there was a greater chance of faster rate hikes.

Economic growth probably took a hit from the devastation caused by Hurricanes Harvey and Irma.

The consensus in the latest Reuters poll was for an annualized expansion of 2.4 percent in the third quarter, down from 2.6 percent in last month’s survey. Growth expectations for this quarter remained at 2.5 percent.

The median full-year forecast was 2.2 percent for 2017 and 2.3 percent for next year.

Predictions for core PCE inflation have not changed much from last month, with the consensus now in a 1.4-1.9 percent range through the end of next year even though the jobless rate has fallen well below 5 percent.

 
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