IMF Approves US$39 Million Disbursement to Jordan

The International Monetary Fund's (IMF) Executive Board completed today its third review of Jordan's performance under an economic program supported by a three-year SDR 127.88 million (about US$164 million) Extended Fund Facility arrangement (see Press Release No. 99/13). Completion of this review enables the release of an SDR 30.45 million disbursement (about US$39 million), which brings total disbursements to Jordan under the IMF-supported program to SDR 66.99 million (about US$86 million).

At the completion of the Executive Board's discussion of Jordan's economic and structural reforms, Stanley Fischer, First Deputy Managing Director and acting Chairman, issued the following statement:

"Jordan's recent economic performance has been commendable in most respects. Real growth has picked up, the public debt ratio has declined significantly, international reserves have risen to a comfortable level, and interest rates have fallen. These successes reflect the authorities' pursuit of prudent macroeconomic policies and implementation of wide ranging structural reforms, including the introduction of a VAT and the pursuit of their privatization program. The shortfall in nontax revenue items in 2000 had, however, resulted in a widening of the fiscal deficit.

"In completing the third review under Jordan's Extended Arrangement with the Fund, the Executive Board emphasized the priority which the authorities should give to achieving a sustained reduction in the fiscal deficit over the medium term. Such a reduction is necessary to reduce Jordan's reliance on exceptional privatization receipts and concessional assistance, and to release resources for private sector investment.

"The authorities' 2001 program targets a significant reduction in the fiscal deficit through both expenditure and revenue measures, including the recent increase in the domestic prices of some petroleum products. While data available for the first half of 2001 suggest that fiscal performance has been broadly in line with the program's targets, strict adherence to the present expenditure plan will be required, as well as the early identification of revenue shortfalls, and the rapid implementation of offsetting measures if needed.

"Continued progress with fiscal consolidation over the medium term will require action on a number of structural fronts. On the expenditure side, a central element will be the government's adoption of a strategy to reform the public pension system, which has been growing rapidly and could become a major burden on the budget. On the revenue side, the authorities should continue their efforts to broaden the tax base and their plans to adjust petroleum product prices regularly to protect revenue.

A continuation of the authorities' good track record in other policy areas will also be important. Specifically, the authorities are committed to the continued prudent conduct of monetary policy in support of the pegged exchange rate, and to further structural reforms, notably pension reform and privatization in the power sector," Mr. Fischer said.