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Foreign aid to Jordan 1924-25/1972-1973 its magnitude, composition and effect

Saket, Bassam Khalil

Foreign aid to Jordan 1924-25/1972-1973 its magnitude, composition and effect Thumbnail


Authors

Bassam Khalil Saket



Abstract

Ever since its creation, Jordan has depended on foreign aid for her survival. Throughout its history (from the 1920's till the present day), the geopolitical position of the country has ensured it a continual flow of foreign aid by the Western World whom the Middle East has been both of political and economic interest. The aid received during the period 1924-1972 was not for economic development. In fact, it was given for political motives.
Although J.D. 681.5 million spread over two decades may seem small, the amount constitutes a large proportion of Jordan's budget revenues, imports and G.D.P. This study is intended to analyse the magnitude, composition and effects of foreign aid which Jordan received over the period 1924-1972.
Chapter I provides a background to this study by describing the developments in the principal sectors of the Jordanian economy. Chapter II on the other hand specifies the magnitude, kind and distribution of foreign aid received by Jordan. As far as the kind of foreign aid is concerned, the country has received most of the aid in the form of grants. The grants received by Jordan were mainly in the form of budgetary aid. Most of the Government expenditure, to a large extent financed by aid was devoted to defence and the maintenance of administrative machinery, and relatively little was spent on economic development. Chapter III is an extension of Chapter II. It traces the sources of foreign aid and the motives, economic and political, behind it.
The total volume of debt, the debt service payments, the burden of debt on the economy and the sectoral distribution of foreign loans are the issues discussed in Chapter IV. Besides these there is also a discussion of the financial terms on which loans were given. It was found that debt service payments have posed no problem to Jordan. An analysis of the distribution of loans showed that the distribution was heavily biased in the favour of the services-producing and against the goods-producing sectors. This pattern of distribution, however, did not improve the debt service capacity of the economy and was not in accordance with the priorities of the Jordanian economy.. Further, in "financial terms" most of the borrowing by Jordan has been worthwhile.
Most loans received with the exception of commercial loans involved a significant degree of concession. Chapter V discusses the non-financial terms of loans and their possible effects. The analysis shows that loans given to Jordan were tied to projects and to projects and procurements in the donors' home markets (double-tied loans). The principal effect of project-tied loans was on the allocation of resources. On the other hand, double-tied loans, coupled with the incompetence of the economic apparatus in Jordan, has enabled donors to substitute Jordan's investment preferences for their own. Furthermore, double-tied loans raised the cost of projects undertaken and consequently reduced the real value of the tied aid.
Chapter VI discusses the performances of income, savings, investment and consumption and the possible effect of foreign aid on these macro-economic variables. Finally, Chapter VII attempts to bring together the analyses and conclusions of previous chapters on the composition and effect of foreign aid to Jordan.

Publicly Available Date Mar 29, 2024

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