IMF Executive Board concludes 3rd review under Jordans Extended Arrangement

The Executive Board of the International Monetary Fund (IMF) on Monday completed the third review of Jordan’s programme supported by the Extended Fund Facility (EFF).

The completion of the review will make the equivalent of SDR 240.17 million (about $335.2 million) immediately available. This brings total IMF disbursements to Jordan since the start of 2020 to the equivalent of SDR 881.68 million (about $1.230 billion) including a purchase of the equivalent of SDR 291.55 million (about $407 million) in May 2020 under the Rapid Financing Instrument, according to an IMF statement.

Jordan’s four-year extended arrangement amounting to the equivalent of SDR 926.37 million (about $1.293 billion, equivalent to 270 per cent 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 the equivalent of SDR 1070.47 (about $1.494 billion, equivalent to 312 per cent of Jordan’s quota in the IMF).

The gradual reopening of the economy in 2021, underpinned by a robust vaccination campaign and supportive policies, has helped spur a nascent recovery.

However, unemployment has remained at high levels, particularly for youth and women.

Despite weak domestic demand, the current account deficit has widened due to higher international fuel prices and intermediate imports, raising gross financing requirements for 2021-22.

The fund’s financial support will help Jordan navigate these challenges and catalyse support from other development partners, which will be critical to enable Jordan to promote an inclusive recovery and build forward better, while continuing to host 1.3 million refugees

Following the Executive Board discussion, Kenji Okamura, Deputy Managing Director and Acting Chair, made the following statement:

“Despite challenging circumstances, sound policies have helped maintain macroeconomic stability, and the structural reform momentum has endured. In addition, a robust vaccination campaign helped underpin a gradual reopening of the economy and usher in a nascent recovery. However, new COVID variants pose downside risks and significant economic slack remains, presenting risks of economic scarring. In the near term, a key priority is to entrench the still-nascent recovery, arrest high unemployment, and protect the most vulnerable. Continued donor support will be critical to help address Jordan’s external financing needs and shoulder the disproportionate burden Jordan bears in hosting refugees.

The fiscal targets for 2022 have been amended to ensure adequate space for the extension of important social protection and job retention programmes and for priority public investment, while still being consistent with bolstering public debt sustainability and rebuilding fiscal buffers. Advancing several legislative reforms to broaden the tax base and close tax loopholes remains critical, as are continued efforts to enhance the efficiency and transparency of public finances.

The monetary policy stance is appropriate, and should remain flexible and data driven, continuing to support the peg. While the financial sector remains sound, continued vigilance is warranted given that the full effects of the pandemic may not yet be reflected in banks’ asset quality. To further enhance the AML/CFT regime, the authorities are committed to resolving the remaining strategic deficiencies identified by the FATF.

The prospects for durable and inclusive growth rest on continued progress on reforms to increase youth and female labour force participation, enhance labour market flexibility, promote competition, reduce the costs of doing business, and strengthen governance and transparency. In this space, the authorities are preparing for the rollout of the electricity tariff reform aimed at reducing high business tariffs in a revenue-neutral manner for the electricity provider NEPCO. The authorities are also working to mitigate the impact of climate change on water scarcity. It will be important to ensure that any projects undertaken in this regard are subject to due financial diligence, adhere to best practices in bidding and transparency, and are consistent with debt sustainability.”