New Delhi : The Executive Board of the International Monetary Fund (IMF) today completed the 2022 Article IV Consultation [1] for Jordan and the Fourth Review Under the Extended Fund Facility (EFF). The completion of the review will make SDR 137.24 million (about US$183 million) immediately available. This brings total IMF disbursements to Jordan since the start of 2020 to SDR 1,018.922 million (about US$1.356 billion) including a purchase of SDR 291.55 million (about US$407 million) in May 2020 under the Rapid Financing Instrument.
Jordan’s four-year extended arrangement amounting to SDR 926.37 million (about US$1.293 billion, equivalent to 270 percent of Jordan’s quota in the IMF), was approved by the IMF’s Board on March 25, 2020, and was augmented on June 30, 2021 to SDR 1070.47 million (about $1.425 billion, equivalent to 312 percent of Jordan’s quota in the IMF) (see Press Release No. 21/203). The conclusion of the fourth review will augment Jordan’s access under the EFF to SDR 1,145.954 million (about US$1.526 billion, equivalent to 334 percent of Jordan’s quota in the IMF).
Helped by the economic reopening, a recovery is underway supported by targeted fiscal and monetary measures. Government revenues have overperformed, reflecting concerted efforts to reduce tax evasion and close tax loopholes. However, unemployment persists at very high levels, particularly among the youth. Inflation—which has been contained in 2021—has risen slightly this year, reaching 3.6 percent at end-April. The current account deficit will narrow from 8.8 percent of GDP in 2021 to around 6.7 percent of GDP in 2022, a somewhat higher level than previously expected, primarily reflecting more elevated fuel import prices. This together with tightened global financial conditions have increased Jordan’s external financing needs. The Fund is helping Jordan meet these needs by increasing planned disbursements in 2022 by SDR 120.085 million including through augmenting access under the EFF by SDR 75.482 million. Stepped-up donor support remains critical, including to aid Jordan in hosting 1.3 million Syrian refugees.
At the conclusion of the Executive Board’s discussion, Mr. Kenji Okamura, Deputy Managing Director and Chair stated:
“Jordan’s economic recovery has continued amid an uncertain external environment. The authorities’ effective policy response to the pandemic, including early expansion of healthcare capacity, has enabled a timely and full reopening of the economy, and a nascent recovery is in train. However, high commodity prices and tighter global financial conditions represent significant headwinds going forward. Near-term policy should focus on maintaining macro-fiscal stability, while protecting the most vulnerable, and advancing reforms to boost growth and jobs.
“Key fiscal targets were met, and there is good progress on reforms to broaden the tax base and close tax loopholes. These efforts have already started to bear fruit, as reflected in the sizable revenue overperformance; and it would be important to implement the remaining legislative and administrative reforms in this area to maintain the revenue mobilization momentum. Given limited fiscal space, blanket fuel subsidies should be phased out in favor of targeted support for the vulnerable. In light of global headwinds and the monetary tightening, a more gradual medium-term path of fiscal consolidation, underpinned by high-quality measures bringing debt under 80 percent of GDP by 2027, is appropriate to support the recovery and protect the vulnerable, while preserving debt sustainability.
“Monetary policy should remain focused on supporting the peg in an increasingly volatile external environment. The authorities should remain alert to emerging balance of payments pressures and ensure that reserve adequacy continued to be preserved. The financial sector remains sound. However, banks’ asset quality should be closely monitored until the impact of the pandemic and the on-going headwinds have been fully absorbed. Subsidized lending schemes should become more targeted and gradually be phased out as the recovery gains momentum. To further enhance the AML/CFT regime, the authorities are committed to an action plan for resolving the remaining strategic deficiencies identified by the FATF.
“Strong and inclusive growth rests on steady progress on structural reforms to support female labor force participation, enhance youth employment and labor market flexibility, promote competition, reduce the costs of doing business, and strengthen governance and transparency. In this regard, advancing legislation to support female labor force participation and improve the competition regulatory framework will be critical. The successful rollout of the new electricity tariffs, which will reduce costs for businesses, is welcome. Continued efforts are also needed to address water scarcity and improve the financial sustainability of both the water and electricity sectors. In this regard, it is important to adopt financial sustainability roadmaps for the water and electricity sectors and ensure due financial diligence and transparency of the procurement process of megaprojects to address water scarcity.
“Stepped up and timely donor support will be critical to help support the authorities’ reform agenda and meet Jordan’s higher external financing needs. It will also help ease the burden of hosting 1.3 million Syrian refugees.
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