August 13, 2020
Hadi Fathallah - Director at NAMEA Group, and policy consultant at the World Bank, IFAD, and FAO.
Given all existing structural and emerging challenges to its agricultural and food sector, Jordan has managed to mitigate the new food security risks associated with the Corona pandemic shock on the agriculture and food value chains and the greater economy. It has done so through active policy engagement, digitization and supply chain management. Nevertheless, this came at the expense of future economic resilience, and as COVID-19 unravels, there is still many food security risks to be accounted for.
Compared to its regional neighbors such Iraq, Saudi Arabia and Egypt, Jordan has dealt with the first wave of the COVID-19 pandemic well, avoiding a health crisis and large death toll. The government of Jordan took early steps in mid-March to restrict the mobility of its 12 million inhabitants, sealing its borders, imposing a state of emergency and curfews. Apart from an initial shock on the agricultural supply chain due to curfews (challenges of farmers with access to land, produce transport etc),the government was active in ensuring adequate food availability for the short-term basis and access through support of well-functioning food supply chains. This was achieved through digitization of payment transfers and essential government services such as obtaining movement licenses digitally.
Unlike its neighbors though, Jordan is less endowed with natural and agricultural resources and has been under considerable economic strain, including its agricultural sector. But Jordan has learned well from the 2010-11 global food security crisis, having worked to develop its strategic wheat stocks, which are estimated to be at 960,000 tons covering around 12 months of consumption. Government mandated strategic stock for rice and maize is set around 7,000 tons and 25,000 tons, enough for one month of consumption. Together with the institution of price controls, the government ensured food access for all, with food consumer price indices indicating slight increases in certain items including vegetables, legumes and meat over the course of the lockdown. Food security among vulnerable Jordanian households has remained largely stable with 15% of households showing a poor or borderline Food Consumption Score (FCS) in the first five months of 2020 compared to 16% in the same period in 2019.
Nevertheless to maintain the food security status quo, something had to give. According to IMF, Jordan’s trade deficit is increasing as exports are projected to be at $13 Billion in 2020, down from $16.3 Billion in 2019. While imports are projected to decrease slightly to $20 Billion, down from $22 Billion in 2019 (due to the decrease in price of oil), gross official reserves in 2020 are projected at $16 billion, enough to cover 9 months’ worth of imports. Nevertheless, according to World Bank data, between the fiscal budget and the balance sheet of the central bank, discounting the $2.5 Billion current account deficit, and in addition to around $2 Billion in illiquid reserves and the central government debt maturing in 2020 – estimated at around 10.27% of GDP (around $4.8 Billion) – the net official liquid reserves would be much less than this amount. As IMF data show, with remittances also on decline – from height of 6.3 Billion in 2014 to 3.3 in 2019 and projected to go 2.7 in 2020 – and highly indebted private sector (domestic credit to private sector is around %77.34 of GDP in 2019), and with the government constrained by a general gross debt 576.44 % of average tax revenues in 2019, a cash crunch is looming, jeopardizing Jordan’s future economic and food security resilience.
Given the limited fiscal (budget deficit) and monetary space (limited foreign reserves and fixed currency peg) due to financial and economic pressures, the risk of a cash crunch is increasing affecting the ability of Jordan to sustain food imports as previous years. The government, together with the Central Bank of Jordan, needs to prioritize cash funds for the food sector and set aside a cash emergency fund as a last resort in case of prolonged crisis and reduction of any expected and planned grants and loans.
While the government is monitoring local prices and commodity stocks in local markets to make export decisions, it is important to keep the balance between stabilizing prices, managing public expectations of food security, and encouraging exports in order to obtain foreign currency reserves. While maintaining Jordan’s one billion dollar food export and expanding it is a priority, it should not come at the expense of local food security.
Moving ahead, the full impact of the COVID-19 pandemic on Jordan’s food supply is still to be assessed, especially with respect to the growing seasons of 2021 to 2022. While emergency interventions are already being defined, a full recovery will entail a more in-depth analysis of the issues, opportunities and vulnerabilities of Jordan’s food supply through a dynamic private sector, a supportive public sector, and a social net to ensure that “no one is left behind.”
The views expressed in this article do not necessarily represent those of the institutions the author works for or is affiliated with.
