The Executive Board of the International Monetary Fund (IMF) today completed the second review of Jordan’s economic performance under the Extended Arrangement under the Extended Fund Facility (EFF). The completion of the second review enables the disbursement of SDR 120.085 million (about US$166.4 million), bringing total disbursements under the program to SDR 223.015 million (about US$309. million).
The Executive Board also approved the authorities’ request for waiver of non-observance of performance criterion on the Net International Reserves of the Central Bank of Jordan (CBJ), an extension of the arrangement to March 2020, and the rephasing of access.
On August 24, 2016, the Executive Board approved a three-year extended arrangement under the EFF for Jordan for an amount equivalent to SDR 514.65 million (about US$723 million at the time of approval of the arrangement, or 150 percent of Jordan’s quota) (see Press Release No. 16/381 to support the country’s economic financial reform program. This program aims at advancing fiscal consolidation to gradually lower public debt and broad structural reforms to enhance the conditions for more social-friendly inclusive growth.
Following the Executive Board’s discussion on Jordan, Mr. Tao Zhang, Deputy Managing Director and Acting Chair, said:
Executive Board Assessment
The authorities are to be commended for preserving macroeconomic stability, maintaining a prudent monetary policy, and ensuring a sound financial system. Jordan faces a challenging environment—including low economic growth, high unemployment, and elevated public debt—underscoring the importance of swiftly implementing policies and reforms to bring public debt on a downward path, boost investment and productivity, and enhance inclusive growth.
In this regard the recent London Initiative has been most timely, and has demonstrated the international community’s ongoing determination to support Jordan. Continued donor assistance is key to help Jordan cope with the refugee crisis and support the authorities’ policy and reform efforts.
The authorities should continue on a path of gradual and steady fiscal consolidation, with due regard to social protection needs. Although a number of key fiscal reforms have been delayed, recent amendments to the income-tax law are encouraging and will be key in helping Jordan secure a fairer and more sustainable fiscal framework. Resolute implementation of the new law is needed, as well as ongoing measures to enhance tax administration and reduce tax evasion. These reforms are crucial to preserve macroeconomic and external stability, place public finances on a sounder foundation, and lessen risks to debt sustainability.
Jordan’s monetary policy stance is appropriate, and the authorities should remain ready to adjust interest rates as needed to continue to maintain an adequate reserve buffer. Banks remain sound and well-capitalized, and steps taken to improve financial sector oversight and supervision are welcome.
The enactment of long needed growth-enhancing reforms is encouraging, including the secured-transactions law, the bankruptcy law, and the business-inspections law. Together with reforms to promote labor-market flexibility, particularly for the youth and women, and publication of a financial-inclusion action plan along with measures to support credit to SMEs, much has been done to set the stage for high-quality, inclusive growth. These efforts should continue, including measures to improve labor market conditions and strengthen the social safety net. Steadfast implementation of these reforms will be vital.
Finally, priority should be given to measures to reduce business costs and boost employment. The authorities’ roadmap to restructure the energy company to reduce high electricity costs for businesses is welcome. Measures under the plan—including elimination of large cross subsidies and implementation of the new tariff-adjustment mechanism—should be implemented as swiftly as possible, and complemented by a well-targeted social protection scheme to safeguard low-income and vulnerable households.