Country Listing

Jordan Table of Contents


Remittance Income

Remittances to Jordan traditionally have been the largest source of foreign currency earnings and a pillar of economic prosperity. In 1980 remittance income was US$666 million, but by 1986, according to official statistics published by the Central Bank, remittance income had increased to an estimated US$1.5 billion at the then-prevailing exchange rate. According to a UN estimate, however, Jordan's 1986 remittance income was about US$1.25 billion and subsequently declined slightly. Actual remittance income was probably higher because much of the money was funneled back to Jordan through unofficial channels. Economist Ian J. Seccombe, who has produced authoritative studies of the Jordanian economy, estimated that real remittance inflows were perhaps 60 percent higher than the official receipts. Another expert, Philip Robins, estimated that real remittances could be twice the official receipts. Official figures did not include remittances in kind, such as automobiles brought back to Jordan and then sold by returning expatriates, nor remittance income exchanged at money changers rather than at banks.

Throughout the late 1970s and early 1980s, official statistics reported that remittance income exceeded export income, in some years by over 200 percent. Remittance income accounted for between 25 percent and 33 percent of the liquid money supply, about 20 percent of the GNP, and exceeded the figures for total government development spending, or total foreign aid receipts.

As early as the mid-1970s, however, remittance income and labor export created economic and demographic distortions. The problems were so pronounced that in the 1970s Crown Prince Hasan called for the creation of an international fund to compensate Jordan and other labor-exporting nations for the negative effects of emigration.

The billions of dollars that Jordanian emigrants pumped back into their home economy fueled prolonged double-digit inflation, especially of housing prices. To rein in inflation and to attract and capture remittances, the government tried to tighten the money supply by maintaining high interest rates for bank deposits. As a consequence, loan costs rose, hampering the investment activity of businesses and farms that needed finance. Also, and because remittances tended to be spent on imported luxury goods, the merchandise trade deficit expanded.

Jordanian labor export also had an unanticipated impact on the domestic labor force. Over time, foreign demand grew disproportionately for Jordan's most highly educated and skilled technocrats and professionals, such as engineers. This "brain drain" caused a serious domestic scarcity of certain skills. At the same time, wages for unskilled labor were bid up as Jordanian employers competed for manual workers. Progress on major infrastructure development projects was hampered. For example, according to a United States government study, the labor shortage idled heavy equipment on the East Ghor (also seen as Ghawr) Canal project for up to 70 percent of the work day. Ironically, Jordan was obliged eventually to import "replacement labor"--usually lowskilled workers from Egypt and South Asia--who transferred their wages out of Jordan. The number of foreign guest workers in Jordan grew compared to the number of Jordanians working abroad. The foreign guest workers also sent home a greater proportion of their wages than did the Jordanians working abroad. In the 1970s, such wage outflows constituted less than 10 percent of Jordan's remittance inflows, but by the late 1980s they offset nearly 25 percent of inflows, neutralizing much of the benefit of labor export.

Data as of December 1989