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Jordan—Letter of Intent, Memorandum on
Economic and Financial Policies, and
Technical Memorandum of Understanding


August 7, 2001

The following item is a Letter of Intent of the government of Jordan, which describes the policies that Jordan intends to implement in the context of its request for financial support from the IMF. The document, which is the property of Jordan, is being made available on the IMF website by agreement with the member as a service to users of the IMF website.

Mr. Horst Köhler
Managing Director
International Monetary Fund
Washington, D.C. 20431

Dear Mr. Köhler:

The government of Jordan has held discussions with the Fund staff in the context of the third review of the program supported by the three-year extended arrangement approved in April 1999. Based on these discussions, the attached Memorandum on Economic and Financial Policies (MEFP) reviews developments under the 2000 macroeconomic program and implementation of structural policies over the past year, updates the government's economic objectives for the medium term, and describes the corresponding macroeconomic and structural policies that are being implemented during 2001. The government believes that performance in relation to the 2000 program was successful, and that the policies for the current year are consistent with sound medium-term objectives. Accordingly, we hereby request completion of the third review.

 
Two of the performance criteria for end-December 2000 incorporated in the program were not met, namely on net bank credit to government and submission to parliament of amendments to the income tax law. As described in the MEFP, fiscal performance in 2000 was adversely affected by developments in nontax revenue that were largely beyond our control, while a substantial improvement in the fiscal position is programmed for this year. Moreover, the reform of the income tax has already been approved by parliament, and the delay in submitting it for parliamentary consideration was due to a constitutional provision that does not permit tax legislation to be submitted while the annual budget law is being discussed. On this basis, we request waivers for the two related performance criteria.

The MEFP specifies indicative targets for end-June and quantitative performance criteria for end-September and end-December 2001. In the absence of end-March and end-June performance criteria, we propose that the purchases under the extended arrangement that would have become available as of May 15 and August 15, 2001, be rephased and distributed evenly over the remaining purchases.

We stand ready to take, in consultation with the Fund staff, any additional measures that may be required to achieve the program's objectives. We will also continue to provide the Fund staff with any information that may be necessary for the assessment of policy implementation and performance under the program.

Very truly yours,

/s/
Michel Marto
Minister of Finance
Ministry of Finance
    /s/
Umayya Toukan
Governor
Central Bank of Jordan

 

JORDAN

Memorandum on Economic and Financial Policies, 2001

1.  This memorandum reviews developments under the 2000 macroeconomic program and implementation of structural policies over the past year, updates the government's economic objectives for the medium term, and describes the corresponding macroeconomic and structural policies that are being implemented during 2001. It also discusses issues related to the monitoring of economic performance in the context of the extended arrangement with the International Monetary Fund.

I.  Developments Under the 2000 Macroeconomic Program

2.  Jordan's economic performance in 2000 continued to strengthen, and was characterized by a pick-up in economic growth, continued very low inflation, a further increase in official international reserves to a comfortable level, and a substantial reduction in the net public debt. Real GDP growth accelerated from 3.1 percent in 1999 to 3.9 percent in 2000, despite the adverse effect of the renewed conflict in the West Bank and Gaza. CPI inflation amounted to less than 1 percent during 2000.

3.  Regarding fiscal policy, developments in 2000 were in many respects consistent with our program, with budgetary expenditure held in line with the target and tax revenue generally performing well. However, the recorded budget deficit (7.4 percent of GDP before grants, and 3.2 percent of GDP after grants) exceeded our target, mainly because of shortfalls in nontax revenues. In particular, as a result of the substantially higher cost of imported oil (by 56 percent), the oil surplus was less than expected and almost 3 percent of GDP lower than in 1999. Other shortfalls included receipts from land sales and royalties from the Jordan Phosphate Mining Company (JPMC), which experienced difficulties last year. As measured under the program, the budget deficit in 2000 includes debt for development spending of JD 25 million (on the basis of which foreign creditors reduced Jordan's foreign debt by the equivalent of about JD 40 million), and excludes JD 15 million in profits from the Central Bank of Jordan (CBJ) that were received after the end of the year. Hence, on this basis, the budget deficit amounted to 8.1 percent of GDP before grants (3.9 percent of GDP after grants). It should be noted that, for 2000, net privatization receipts amounting to over 7 percent of GDP (notably from the sale of shares in the Jordan Telecommunications Company) were treated as financing rather than revenue, and thus did not contribute to lowering the recorded budget deficit.

4.  The overall fiscal deficit, which includes the change in nontreasury accounts and spending out of privatization proceeds, amounted to 8.9 percent of GDP. While spending out of privatization proceeds was lower than envisaged, there was a drawdown in nontreasury accounts following the buildup in 1999. With budgetary grants broadly as expected, the overall fiscal deficit after grants was lower, at 4.7 percent of GDP, but still more than targeted. Hence, the reduction in net bank credit to government was smaller than programmed. Nevertheless, net government and government guaranteed debt, both domestic and external, declined markedly in relation to GDP during 2000, on account of a buildup of privatization-related government deposits with the CBJ and the government's proactive external debt reduction policy.

5.  Monetary developments in 2000 reflected growing confidence in the national economy. The growth in broad money exceeded 10 percent, while credit to the private sector grew by about 4½ percent. The net foreign assets of the banking system rose sharply, in part as a result of substantial privatization receipts. Similar trends were apparent at the level of the central bank, and all end-September and end-December monetary performance criteria were met comfortably. Despite the rise in interest rates in the United States, the CBJ was able to keep the yield on certificates of deposit at about 6 percent through the year and reduce reserve requirements substantially, while retail interest rates continued to fall.

6.  The external current account remained in surplus during 2000, despite some widening of the trade deficit as imports grew quite quickly in response to the positive trends in the economy and oil import prices rose sharply. Large inflows of UN compensation payments to those affected by the Gulf war, and higher workers' remittances, contributed to the continued strength of the current account. Private capital inflows, which included large privatization receipts and other foreign direct investment, were substantial in 2000. As a result, official foreign exchange reserves rose from US$2 billion at the start of the year to close to US$2.8 billion, equivalent to 8 months of imports, or one-third of Jordanian dinar broad money.

II.  Implementation of Structural Policies

7.  Over the last year, we made substantial further progress in implementing our structural reform agenda. In the fiscal area, parliament passed the Second Stage General Sales Tax (GST) law, effectively converting the GST into a VAT, which became operational on January 1, 2001. More recently, parliament approved two additional important laws reforming, respectively, the income tax system and the regime governing the public debt. Regarding financial sector reform, the new Banking Law and a Deposit Insurance Law were enacted; the deposit insurance agency has been established; the CBJ issued a new regulation relating commercial banks' maximum foreign currency positions to their capital; and, from January 2001, the criterion for classifying loans as doubtful has been tightened from 150 days past due to 120 days past due.

8.  On privatization, following the successful sale of shares in JTC in early 2000, a consortium has been selected to build and operate a power plant as Jordan's first independent power producer. Also, the duty free, flight training, and catering subsidiaries of the Royal Jordanian (RJ) airline have been sold. During 2000 and early 2001, the Jordan Investment Corporation sold its shares in several additional companies. The design of a pricing formula for the electricity industry to be implemented prior to the privatization of the state-owned generation and distribution companies is now at an advanced stage, and we have begun the process of selecting consultants to advise on the privatization of the generation and distribution companies.

III.  Medium-Term Framework and Policies for 2001

A.  Medium-Term Framework

9.  Building on the progress over the last two years, the government envisions a further strengthening of macroeconomic performance over the medium term. Real GDP growth is projected to rise to 6 percent per year by 2005, even though economic activity may be adversely affected by tensions in the region in the short term. Inflation is expected to remain low in coming years. Continued progress with fiscal consolidation is envisaged to reduce the overall fiscal deficit before grants to 3.0 percent of GDP, and to eliminate the deficit after grants by 2005. Consequently, gross government debt would decline from 101 percent of GDP at end-2000 to under 65 percent of GDP by end-2006, with external government debt expected to fall from 81 percent of GDP to about 50 percent of GDP over the same period. Gross domestic investment would rise gradually, and although gross national savings are expected to decline in 2001 (associated with the tapering off of UN compensation payments), they would increase again in subsequent years. While these trends would initially be reflected in a small current account deficit, the current account is expected to return to broad balance over the medium term. Despite higher payments on external debt following the expiration of the current Paris Club arrangement in April 2002, official foreign exchange reserves should remain at about the current comfortable level.

B.  Macroeconomic Policies for 2001

10.  The government's macroeconomic objectives for 2001 are to sustain economic growth in the face of a difficult regional situation, maintain low inflation, keep official foreign exchange reserves at broadly their current comfortable level, and achieve further reductions in overall and external government debt. Prior to the recent increase in tensions between Palestinians and Israelis, which have affected tourism and some areas of manufacturing in Jordan, we had envisaged a further significant increase in economic growth in 2001. While we now hope that it will be possible to hold real GDP growth at 4 percent, the situation remains uncertain and we have formulated our economic program for 2001 on the somewhat more conservative assumption of a 3.5 percent growth rate. Despite the impact of the implementation of the VAT system, and the adjustments in petroleum product prices, CPI inflation will remain low in 2001 (around 1½ percent). Achievement of these objectives will be supported by a reduction in the fiscal deficit, prudent monetary policy, and further progress on structural reforms. In this context, the balance of payments position will remain comfortable.

Fiscal policy

11.  The government is targeting a budgetary deficit of JD 390 million (6.3 percent of GDP) in 2001. In addition, we intend to undertake spending out of privatization funds amounting to JD 35 million (about ½ percent of GDP). The overall deficit before grants (including privatization spending) is projected at JD 424 million (6.8 percent of GDP), with the deficit after grants at JD 179 million (2.9 percent of GDP), which will allow for a further reduction in the ratio of government debt to GDP. Achievement of these targets will require, in relation to the 2000 outcome, a substantial fiscal effort. On the revenue side, adjustments in the prices of petroleum products will contribute 0.3 percent of GDP in revenue. In addition, revenue will be enhanced by the recent reform of the GST (the record keeping requirements of which will also strengthen income tax administration), increased profit transfers by the Jordan Investment Corporation, the resumption in royalty payments by the JPMC, and higher fees. Government expenditure is to be held to 34.1 percent of GDP by limiting capital expenditure to 5.5 percent of GDP, an increase of 0.6 percent of GDP over 2000. The capital budget includes debt for development spending of JD 35 million (0.6 percent of GDP). The government stands ready to take additional measures to protect the fiscal targets if necessary by, for example, deferring some of the planned increase in capital expenditure. Concerning the domestic financing of the fiscal deficit after grants, the new public debt law enables the government to rely exclusively on the auctioning of government securities; planned auction proceeds in excess of the government financing needs will be allocated to reducing the balance in the overdraft account and to the further retirement of interest-free advances obtained in the past from the CBJ.

12.  Adequate provision of social services and alleviation of poverty and unemployment constitute major concerns of the government. Total expenditure on health, education and social programs amounted to about one quarter of total budgetary expenditure, or more than 8 percent of GDP, in 1999 and 2000. This is a comparatively high proportion by international standards, and it reflects the government's emphasis on investing in human capital and social infrastructure. Despite the large targeted reduction in the budget deficit, the government is determined to protect social spending in the current budget. While expenditure on health and education accounts for the bulk of social outlays, the activities of the National Aid Fund (NAF) and the Social Productivity Program (SPP), which have been expanding, are central to the government's anti-poverty effort. The NAF represents the government's main arm for reaching chronically poor households through targeted monthly cash assistance to unemployable poor households lacking a source of income. Spending by NAF rose from JD 22 million in 1999 to JD 26 million in 2000, and the government has allocated JD 30 million to the Fund in 2001, for the purpose of broadening the base of beneficiaries. In addition, the government launched the SPP in 1998 as a national program to enhance the overall social productivity of the nation with a focus on poor households. Besides restructuring and expanding the NAF, the SPP seeks to improve the social and living conditions of the poor through community infrastructure projects, promote small and micro enterprises; and generate productive employment through training and employment support. SPP outlays increased from JD 6 million in 1999 to JD 25 million in 2000 and, are budgeted to increase to about JD 45 million in 2001.

Monetary and exchange rate policy

13.  In 2001, the CBJ will continue to target exchange rate stability, consistent with its objective of keeping inflation low and providing a stable financial environment conducive to economic growth. As in the past, the CBJ is ready to adjust interest rates on monetary instruments as needed to ensure achievement of the program's objective for international reserves. Since those reserves are at a comfortable level, we expect to maintain them close to the present level (US$2.6 billion) for the remainder of the year; this is consistent with keeping the CBJ's net international reserves above JD 1,471 million (US$2,075 million). While the objective of exchange rate stability will largely determine the course of monetary policy, the CBJ will adopt, as an additional safeguard, a ceiling of JD 220 million on the change in its net domestic assets. The monetary program has been designed on the assumption of some further decline in the velocity of broad money, and allows for ample credit to the private sector to finance investment and business activity.

C.  Structural Policies for 2001

Budget and public sector reforms

14.  We intend to sustain the pace of structural reforms following the considerable advances of the last two years. In the tax reform area, the government will focus on ensuring successful implementation of the VAT system, and have requested Fund technical assistance to strengthen its administration. In the area of budgetary financing, the just approved new public debt law provides for greater flexibility in the issuance of government securities (combined with prudent limits on external and total public debt) , which will contribute to more efficient debt management and to the development of the capital market.

15.  Developments over the last year have underscored the need to establish a closer link between the domestic prices of petroleum products and the associated import cost, so as to promote efficient energy use and to insulate the budget from large fluctuations in petroleum-related revenue. Accordingly, following the adjustments already made, the government will review the domestic prices of petroleum products every three months, beginning in September 2001, and will adjust them as needed to protect the associated revenue.

16.  The net cost of the public pension system, as it is presently structured, is projected to place an increasing burden on the budget over the medium term, and the government attaches high priority to introducing reforms that will put the pension system on a sounder financial footing. The government has recently established a high-level working group and a technical group to design a reform strategy, and intends to adopt such a strategy by the end of the year. We have requested technical assistance from the Fund for this purpose.

17.  The government has initiated a program of modernization of the public sector, and in particular of the public administration. Progress has already been made in such areas as simplification of government work procedures; improving client access to government services; introducing electronic-based procedures; revising civil service by-laws; and improving the functioning of the judicial system. Proposals to modernize budget formulation, financial management in government and the audit function are also under consideration. The government is benefiting from financial assistance from the World Bank in support of these reforms, and the first of three annual Public Sector Reform Loans, which was approved recently, is expected to be disbursed shortly.

Financial sector reform

18.  The CBJ has made considerable progress in promoting the efficiency of Jordan's financial system, and continues to monitor closely developments in the banking sector and indicators of banking system soundness. Following the enactment last August of the new Banking Law, the CBJ has issued revised bank regulations relating notably to loan provisioning and credit concentration; the latter has eliminated the CBJ's discretion to approve loans in excess of the limit stipulated under the previous regulations. Other regulations are being revised in light of the new law, including those pertaining to bank ownership of equity in financial and nonfinancial enterprises and to the principles governing the establishment of bank branches domestically and abroad. Additional efforts to promote bank soundness include working with banks on upgrading their internal control systems. Moreover, to improve efficiency, the CBJ is exploring with banks the steps that will be required to broaden electronic banking services.

Privatization

19.  The focus of the privatization program in the period ahead is on the power sector. The government expects in the immediate future to finalize the power pricing formulas, and fully separate the activities of the generation, transmission, and distribution companies created in 1999. We are also in the process of setting up an effective regulatory body for the industry. These actions will set the stage for privatizing the generation company and the main electricity distribution company, and selling the government's majority shareholding in a regional distribution company in the course of 2002. The next step in this process is the selection of a consortium of legal, technical, and financial consultants to help map out a strategy and procedures; request for proposals have already been sent to a short list of six candidates, and replies are expected shortly. Meanwhile, the government is actively seeking a strategic partner for the Royal Jordanian airline, which has been fully prepared for privatization, and intends to complete the sale of the non-core subsidiaries in the course of this year. We also intend to continue disposing of the minority shareholdings of the Jordan Investment Corporation as market conditions permit.

IV.  Program Monitoring

20.  Purchases under the extended arrangement will continue to be subject to the observance of performance criteria, completion of program reviews, and a continuous performance criterion on the non-accumulation of new external payments arrears. In addition, the government will not impose restrictions on payments and transfers for current international transactions, introduce multiple currency practices, conclude bilateral payment arrangements that are inconsistent with Article VIII of the Fund's Articles of Agreement, or impose import restrictions for balance of payments reasons.

21.  Quantitative performance criteria have been established for end-September and end-December 2001 (Table 1). The performance criteria will apply to changes in net international reserves and net domestic assets of the CBJ; the overall fiscal deficit before grants; the stock of government and government-guaranteed short-term external debt; and the contracting of nonconcessional medium- and long-term government and government-guaranteed external debt. We will consult with Fund staff regarding developments that may affect external financing and grants, and any significant deviation from programmed levels will be a subject of the next program review.

22.  Consistent with the discussion in Section III, cabinet approval of a reform strategy for the public pension system will constitute a structural benchmark for end-December 2001. Progress in the areas of pension reform and petroleum product pricing will be a subject of the next program review. Given the paramount importance of the former, it is expected that, at the time and the next review, we will have made substantial progress in specifying suitable objectives and the main elements of the reform strategy to be adopted by the end of the year. The final review under the arrangement, in addition to covering these two areas, would also focus on the budget for 2002.

Table 1. Jordan: Quantitative Performance Criteria and Indicative Targets
Under the Extended Arrangement, 2001

  End-June1 End-September End-December

  (Cumulative flows from January 1,
in millions of Jordanian dinars)
Performance criteria      
Net international reserves of the CBJ2 -231 -252 -256
Net domestic assets of the CBJ3,4 75 112 220
Overall deficit before grants of the general budgetary
government5
255 330 424
       
  (In millions of U.S. dollars)
Outstanding stock of government and government- guaranteed short-term external debt 25 25 25
Contraction of new nonconcessional medium- and long-term government and government-guaranteed external debt 250 350 450
   Of which: with maturity of up to and including five years 150 250 250
       
  (Cumulative flows from January 1,
in millions of Jordanian dinars)
Memorandum items      
Programmed sum of foreign grants, net external financing of the budget (excluding project loans) and privatization proceeds from abroad 102 256 269
Programmed expenditure associated with debt swaps with official bilateral creditors 10 15 35
Maximum downward adjustment to the ceiling on the overall deficit of the general budgetary government before grants due a shortfall in expenditure associated with debt swaps Source: Quarterly macroeconomic program. 6 13 20

1End-June targets are indicative.
2These floors will be adjusted upward (downward) by the extent to which the sum of foreign grants, net external financing of the budget (excluding project loans), and privatization proceeds from abroad (net of the direct foreign costs of privatization) exceeds (falls short of) the levels specified above.
3These ceilings will be adjusted downward (upward) by the amount that the floor on net international reserves are adjusted upward (downward) due to an excess (shortfall) in the sum of foreign grants, net external financing of the budget (excluding project loans), and privatization proceeds from abroad (net of the direct foreign costs of privatization).
4These ceilings will be adjusted downward (upward) by the extent to which the CBJ decreases (increases) reserve requirements on Jordanian dinar deposits of the banking system. The adjustment will equal the change in the required reserve ratio multiplied by the stock of deposits at licensed banks at the start of the month when the new reserve requirement ratio applies that are: (i) denominated in Jordanian dinars; and (ii) subject to reserve requirements.
5These ceilings will be adjusted downward by the extent to which excpenditure associated with debt swaps with official bilateral creditors falls short of the amount specified above, up to the maximum specified above.

 

JORDAN

Technical Memorandum of Understanding

1. Under the extended arrangement, the Government of Jordan is committed to implementing a financial program and a set of structural reforms. Progress in implementing the financial program will be monitored on the basis of quantitative performance criteria and indicative targets as set out in this memorandum, which is organized as follows: Section I specifies the quantitative performance criteria, indicative targets, and applicable adjusters. Section II specifies the content and frequency of the data to be provided for monitoring the program. Definitions of the principal concepts and financial variables are provided in Section III.

I. Quantitative Performance Criteria and Indicative Targets

2. The quantitative performance criteria will consist of quarterly ceilings or floors on the following variables: (a) cumulative change (from December 31, 2000) in the net international reserves (NIR) of the Central Bank of Jordan (CBJ); (b) cumulative change (from December 31, 2000) in the net domestic assets (NDA) of the CBJ; (c) overall deficit before grants of the central government (as defined in Section III); (d) outstanding stock of government and government-guaranteed short-term external debt; and (e) the contracting (from January 1, 2001) of new nonconcessional medium- and long-term government and government-guaranteed external debt with an initial maturity of more than one year, with a subceiling on debt with an initial maturity of up to and including five years. The floors and the ceilings applicable to the preceding variables will be monitored on the basis of the magnitudes specified in Table 1 of the Memorandum on Economic and Financial Policies (MEFP).

Adjusters to the performance criteria

3. The performance criteria specified above will be adjusted as follows:

  • The ceilings on the overall deficit before grants of the central government will be adjusted downward by the extent to which expenditure associated with debt swaps with official bilateral creditors falls short of the amounts specified in Table 1 of the MEFP, up to the maximum downward adjustment specified therein.

  • The floors on the net international reserves of the CBJ will be adjusted upward (downward) by the extent to which the sum of foreign grants, net external financing of the central government (excluding project-related loans), and privatization proceeds from abroad (net of identified direct costs of privatization) received during 2001 exceeds (falls short of) the levels specified in Table 1 of the MEFP.

  • The ceilings on the net domestic assets of the CBJ will be adjusted upward (downward) by the extent to which the floors on the net international reserves of the CBJ are adjusted downward (upward) due to shortfalls (excesses) in the sum of foreign grants, net external financing of the central government (excluding project-related loans), and privatization proceeds from abroad (net of identified direct foreign costs of privatization) received during 2001.

  • The ceilings on the net domestic assets of the CBJ will be adjusted downward (upward) by the extent to which the CBJ decreases (increases) reserve requirements on Jordanian dinar deposits of the banking system. The adjustment will equal the change in the required reserve ratio multiplied by the stock of deposits with licensed banks at the start of the first month when the new reserve requirement ratio applies that are: (i) denominated in Jordanian dinars and; (ii) subject to reserve requirements.

II. Provision of Information to the Fund Staff

4. To permit the monitoring of developments under the program, the government will provide to Division B of the Middle Eastern Department the information specified below:

  • CBJ's foreign exchange reserves (weekly).

  • Data on CD auctions (following each auction).

  • Monetary statistics; interest rates and consumer prices; and exports and imports (monthly).

  • Summary budget operations, revenues, expenditures (including net advances), net domestic financing, balances in the government accounts with the CBJ and commercial banks (including privatization accounts), swaps with official bilateral creditors and associated expenditure, the gross cost of debt buybacks and the proceeds from the sale of any collateral released (with accrued interest payments and receipts identified separately), and the receipt and use of privatization proceeds (monthly).

  • Detailed foreign grants and loans received by the central government; amortization and interest (including separately, cash payments, rescheduled and overdue amounts, excluding deferred debt service payments to the Arab development funds); any put or call options, collateral guarantees, warrants or similar derivative arrangements entered into by the government; and the onlending operations of the government (monthly).

  • Balance of payments (current and capital accounts) and external debt developments (quarterly).

  • List of short-, medium- and long-term public or publicly guaranteed external loans contracted during each quarter, identifying, for each loan: the creditor, the borrower, the amount and currency, the maturity and grace period, and interest rate arrangements (quarterly).

  • New external arrears (if any) and total outstanding amount of arrears (quarterly), excluding deferred debt service payments to the Arab development funds.

  • National accounts statistics (quarterly).

5. Weekly data and data on CD auctions should be sent to the Fund with a lag of no more than one week. Monthly and quarterly data should be sent within a period of no more than six weeks (for the monetary and fiscal variables), and within a period of no more than eight weeks for other data (three months for national accounts statistics). Any revisions to previously reported data should be communicated to the staff in the context of the regular updates.

III. Definitions of the Principal Concepts and Variables

6. The net international reserves of the CBJ consist of foreign exchange (foreign currency cash, deposits with foreign correspondents, and holding of foreign securities, excluding any assets that are pledged or used as collateral), gold, IMF reserve position, and SDRs, less the foreign liabilities of the CBJ (including to the Fund), commercial banks' foreign currency deposits with the CBJ, and any change in the CBJ's net foreign currency swap and forward position from December 31, 2000. In addition, deposits received from foreign central banks or governments will be treated as liabilities in NIR, irrespective of maturity. Alternatively, the NIR is equivalent to the NFA of the CBJ adjusted for outstanding purchases from the Fund and the bilateral accounts (net).1 Gold will be valued at the average price of JD 175.25 per fine troy ounce. The U.S. dollar value of foreign assets and liabilities will be converted into Jordanian dinars at the exchange rate of JD 1 = US$1.4104.

7. Reserve money is defined as the sum of: (i) currency in circulation (currency outside banks and commercial banks' cash in vaults); and (ii) nonremunerated deposits of licensed banks in Jordanian dinars.

8. The net domestic assets of the CBJ are defined as reserve money less the sum of net international reserves and bilateral accounts. They include: (i) net claims on the central government; (ii) net claims on autonomous agencies with their own budgets; (iii) net claims on the social security corporation; (iv) net claims on municipalities and local governments; (v) net claims on nonfinancial public enterprises; (vi) claims on licensed banks; (vii) claims on other financial institutions net of deposits; and (viii) other items (net); less: (ix) JD-denominated CDs; and (x) remunerated deposits of licensed banks in Jordanian dinars; and (xi) other remunerated deposits with the CBJ.

9. The central government is defined as the budgetary central government that is covered by the annual General Budgetary Law (GBL). It excludes the budgets of the 27 autonomous agencies but includes all ministries and government departments which operate in the context of the central authority system of the state.

10. Net external financing of the central government is defined as cash external debt disbursements, less scheduled external debt repayments (excluding deferred amortization payments to the Arab development funds); less the gross cash payment made in relation to buy-backs of debt and/or swaps of debt to official creditors net of: (i) accrued interest paid and (ii) the market value of any collateral released, excluding accrued interest receipts; plus exceptional external financing (rescheduled principal and interest plus accumulation of external arrears if any). The debts covered are debts of the central government (excluding off-budget military debts) and any foreign debts that are channeled through the central government to finance operations of the rest of the public sector.

11. Net bank financing of the central government is defined as the change in the banking system's claims in Jordanian dinars and in foreign currency on the central government (excluding holdings of Brady bonds), and net of the balances on government accounts with the CBJ and commercial banks (including balances reflecting privatization receipts, but excluding deposits of UN compensation funds relating to damages incurred in the context of the Gulf war). Foreign currency claims will be converted into Jordanian dinars at the exchange rate of JD 1 = US$1.4104.

12. Net domestic nonbank financing of the central government is defined as central government borrowing from, less repayments to, the nonbank sector (including the nonfinancial public sector not covered by the general budget, and, specifically, the Social Security Corporation), and the cumulative change (from December 31, 2000) in the stocks of government securities held by nonbanks and in the float. Float consists of the value of checks issued by the government but not yet cashed by the beneficiaries.

13. The overall deficit before grants of the central government is defined as the sum of: (i) net external financing of the central government (including exceptional financing, i.e., rescheduled principal and interest payments, but excluding deferred debt service payments to the Arab development funds); (ii) privatization receipts (net of identified direct costs of privatization) received during the relevant period; (iii) net domestic bank financing of the central government; (iv) net domestic nonbank financing of the central government; and (v) grants received from abroad by the central government (excluding off-budget military grants).

14. Government and government-guaranteed external debt covers all external debts incurred or guaranteed by government. "Debt" has the meaning set forth in point No. 9 of the Guidelines on Performance Criteria with Respect to Foreign Debt (Decision No. 12274-(00/85), adopted August 24, 2000) and includes loans, bonds, suppliers credits, leases, and other liabilities as further defined in the guidelines. Excluded are leases of real property by Jordanian embassies or other foreign representations, and any other lease from a nonresident for which the present value of all payments contracted during the period of the lease does not exceed JD 1 million. For program purposes, "government" includes the central government defined in paragraph 9 above, and government departments and official agencies which do not seek profit and whose budgets are issued independent of the GBL. The external debt will be expressed in U.S. dollar terms, with debts in currencies other than the U.S. dollar converted into U.S. dollars at the market rates of the respective currencies prevailing on December 31, 2000 as published in IFS.

15. Government and government-guaranteed short-term debt covers external debt defined in paragraph 14 above with an original maturity of up to and including one year, with the exception of normal import-related financing and instruments contracted after December 31, 2000, with put dates that occur within one-year of the original contracting date.

16. The performance criterion on contracting or guaranteeing of nonconcessional government and government-guaranteed external debt applies not only to debt as defined in paragraph 14 above, but also to commitments contracted or guaranteed by government for which value has not been received. The performance criterion covers the contracting or guaranteeing by government or the CBJ of debt as defined in paragraph 14 above with an original maturity of more than one year and a grant element of less than 35 percent, using currency-specific discount rates based on the commercial interest rates reported by the OECD (CIRRs). Discount rates for assessing the conditionality of loans with a maturity of at least 15 years will be based on the average CIRRs over the last 10 years. The assessment of conditionality for loans with maturities of less than 15 years will be based on the average CIRRs of the preceding six-month period.2 Aircraft leases contracted by Royal Jordanian airline are excluded.

17. Any variable that is mentioned herein for the purpose of monitoring a performance criterion and that is not explicitly defined, is defined in accordance with the Fund's standard statistical methodology, such as the Government Financial Statistics. For variables that are omitted from the TMU but that are relevant for program targets, the authorities of Jordan shall consult with the staff on the appropriate treatment based on the Fund's standard statistical methodology and program purposes.

List of Reporting Tables


Table

Source


Fiscal Data  
F1.  
Government Domestic Revenues Ministry of Finance
F2.  
Government Expenditure and Net Lending Ministry of Finance
F3.  
Summary Fiscal Operations Ministry of Finance
F4.  
Balances of Government Accounts with the Banking System Ministry of Finance
F5.  
Foreign grants (Quarterly) Ministry of Finance
F6.  
Foreign loans (Quarterly) Ministry of Finance
F7.  
Net Lending to Public Entities Ministry of Finance
F8.  
Receipt and Use pf Privatization Proceeds Fund Ministry of Finance
F9.   Budgetary Expenditure Related to Debt Swaps with Official Creditors Ministry of Finance  
     
Monetary Data  
M1.  
Monetary Survey Central Bank of Jordan
M2.  
Balance Sheet of the Central Bank Central Bank of Jordan
M3.  
Consolidated Balance Sheet of Deposit Money Banks Central Bank of Jordan
M4.  
Selected Bi-Weekly Statistics Central Bank of Jordan
M5.  
Foreign Assets and Liabilities of the Central Bank of Jordan Central Bank of Jordan
     
External Sector Data  
E1.  
Quarterly Data on the Balance of Payments Central Bank of Jordan
E2.  
Quarterly Data on External Financing Central Bank of Jordan
E3.  
Monthly Data on Exports and Imports Central Bank of Jordan
E4.  
Monthly Data on Export and Import Prices and Volumes Central Bank of Jordan
E5.  
Quarterly Data on External Debt Service Ministry of Finance
E6.   Quarterly Data on Outstanding and Newly Contracted External Debt Ministry of Finance  
E7.  
Quarterly Data on Private Capital Flows Central Bank of Jordan


1The definition of NIR implies that, for program monitoring purposes, disbursements and/or purchases from the Fund are to be recorded in the monetary accounts as external liabilities of the CBJ, rather than deposits of the government. Furthermore, commercial banks' foreign currency deposits with the CBJ are treated as foreign liabilities in the calculation of NFA.
2Margins will be added to CIRRs as follows: 75 basis points for loans with maturity of less than 15 years; 100 basis points for loans with maturity of at least 15 years and less than 20 years; 115 basis points for loans with maturity of at least 20 years and less than 30 years; and 125 basis points for loans with maturity of at least 30 years.
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