IMF Mission Reaches Staff-Level Agreement on the Completion of the First Review Under the Stand-By Arrangement with JordanPress Release No. 13/70
March 11, 2013
An International Monetary Fund (IMF) mission visited Amman during February 20–March 6 for discussions on the first review of the economic program supported by a Stand-By Arrangement. The 36-month Stand-By Arrangement (SBA) in the amount of SDR 1.364 billion (about US$2 billion, or 800 percent of Jordan’s quota at the IMF) was approved by the Executive Board on August 3, 2012 (see Press Release No. 12/288).
Kristina Kostial, IMF Mission Chief for Jordan, issued the following statement today:
“We welcome the authorities’ strong commitment to implementing their national program despite an adverse external environment. We have reached a staff-level agreement to conclude the first review under the SBA, which will have to be approved by the Executive Board. Conclusion of the review by the Executive Board would make available to Jordan the second tranche in the amount of SDR 255.75 million (about US$385 million). The Executive Board could consider Jordan’s request for completion of the first review under the SBA as early as April.
“Jordan’s economy held up well in 2012. Growth in 2012 is estimated to have increased slightly to 2.8 percent. Following the liberalization of fuel prices in late 2012, inflation increased to 7.2 percent at year-end, but has now eased to 6.7 percent at end-January 2013. Reflecting lower grants and higher energy imports, the external current account deficit widened to about 18 percent of GDP in 2012, but a stronger capital account helped bring the overall balance of payments in line with expectations.
“The authorities have been implementing strong macroeconomic policies to reduce external and fiscal imbalances. The central government was on track and the electricity company has stayed within program targets. Moreover, the Central Bank of Jordan has managed well temporary pressures on reserves in the fall of 2012. With sizeable grants from GCC countries and a successful U.S. dollar-denominated domestic treasury bond issuance, international reserves now stand at a comfortable level.
“Looking into 2013, the outlook is good. Real GDP growth is expected to accelerate to above 3 percent reflecting an increase in government capital spending, higher domestic consumption, and a recovery in exports. Inflation is expected to decline to about 3.2 percent at year-end. At the same time, the external current account is projected to improve significantly, mainly because of higher grant financing and lower energy imports (including from a doubling of gas flows from Egypt). This, in combination with stronger capital account, will allow the Central Bank of Jordan to further strengthen its reserve position.
“The authorities will continue their program of reforms to keep the fiscal and external balances on a sustainable path. Consolidation will continue to be gradual so as to not jeopardize growth prospects and the social stability. The envisaged measures include an increase in government investment, and improvements in tax administration and public financial management. The authorities have also drafted a medium-term energy strategy to return the electricity company to cost recovery, on which they intend to consult with parliament. Another important element of the program is structural reform to reduce unemployment and increase growth.
“The mission would like to thank the authorities for constructive discussions and for their hospitality.”