## 1jorea2020002

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---

### EXECUTIVE SUMMARY — Context and financing request
- Near-term outlook worsened due to the COVID-19 crisis and strict lockdown measures.
- 2020 expectations:
  - Output: expected to contract sharply.
  - Fiscal and external balances: expected to deteriorate.
  - Public debt: expected to increase.
  - Balance of payments gap: a $1.5 billion gap expected to emerge in 2020.
- Authorities requested urgent IMF support under the Rapid Financing Instrument (RFI) because the first EFF review is several months away and ad hoc augmentation is not feasible.
- Proposed RFI purchase:
  - SDR 291.55 million (85 percent of quota) — about $400 million.
  - This would cover about 1/4 of the financing need.
  - The remainder expected from Jordan’s development partners and by targeting smaller accumulation of reserves than under the EFF arrangement.

### Policy response — Fiscal measures and fiscal impacts
- Projected fiscal impacts for 2020:
  - Combined public sector deficit in 2020: projected to increase by 3.2 percent of GDP compared to 2019.
  - Domestic revenue: projected to decline by 12 percent in nominal terms (2 percentage points of GDP) compared to 2019.
  - Central government primary deficit: projected to increase by 2.2 percentage points of GDP compared to 2019.
  - Combined public sector deficit projected to widen by 3.2 percentage points of GDP to 8.3 percent of GDP in 2020.
- Specific fiscal actions taken or planned:
  - Established a fund to cover emergency medical outlays; exempted medical supplies from sales tax.
  - Temporary cash-flow relief: delayed payments of sales taxes and customs duties within the year; electricity bills delayed until June.
  - Temporarily reduced social security contributions from 21.75 to 5.25 percent.
  - Temporarily reduced the maximum load tariff for electricity consumption of selected sectors.
  - Cash transfer program targeting 200,000 most vulnerable households (0.3 percent of GDP).
  - Temporarily reduced salaries to senior government officials; postponed increase in wages and allowances for all public sector employees until the end of 2020; imposed a hiring freeze.
  - Postponed non-priority investment; sought savings in the wage bill, budgetary transfers, and non-essential investment.

### Policy response — Monetary and financial sector measures
- Central Bank of Jordan (CBJ) actions:
  - Reduced policy rates by 150 basis points.
  - Injected liquidity equivalent to 1.8 percent of GDP by reducing reserve requirements on time deposits from 7 percent to 5 percent.
  - Allowed rescheduling of loans and improved terms of existing refinancing programs for SMEs and introduced new programs.
  - Directed banks to postpone distribution of 2020 profits to add capital and liquidity buffers.
- CBJ stance:
  - Will balance liquidity provision with limiting pressure on international reserves and safeguarding financial stability.
  - Prudential regulations and accounting standards will remain aligned with best international practices.

### Transparency, governance, and safeguards
- Authorities’ commitments:
  - Create specific budget lines to track and report crisis-related expenditure; link emergency fund to the Treasury Single Account.
  - Publish procurement plans, notices and awarded contracts, including beneficial ownership of awarded entities, for emergency responses on the government website.
  - Undertake ex-post audits of all crisis-mitigating inflows and spending by the Jordanian Audit Bureau and publish results within 6 months from the end of the fiscal year.
  - Submit Central Bank to a safeguards assessment; provide external audit reports to IMF staff and authorize auditors to discuss with IMF staff.
  - Update the Memorandum of Understanding between CBJ and Ministry of Finance on servicing Fund obligations.

### Debt sustainability and capacity to repay
- Staff assessment:
  - Risks have increased significantly, but public debt is assessed as sustainable.
  - Reasons: relatively large share of domestic and longer-term debt, and Jordan’s capacity to repay the Fund remains adequate.
- Strengthening factors:
  - Renewed fiscal consolidation and higher growth after the pandemic supported by structural reforms.
  - Continued support by multilateral and official bilateral creditors.
- Fund exposure indicators:
  - Fund credit outstanding will peak in 2023 at 3.3 percent of GDP.
  - Peak exposure equivalents: around 9 percent of exports of goods and services, 10 percent of gross usable reserves.
  - EFF repurchases and charges peak at 1.8 percent of gross usable reserves and reach 1.5 percent of exports of goods and services in 2024.

### Eligibility for an RFI
- Jordan meets RFI requirements:
  - Faces an urgent balance of payments need which cannot be covered without IMF financing and could undermine macroeconomic stability if unaddressed.
  - Proposed access of 85 percent of quota (SDR 291.55 million) keeps access within normal limits.
- Staff supports the proposed purchase under the RFI.

### Background (pre-COVID-19 performance)
- 2019 highlights:
  - Real GDP growth: about 2 percent in 2019.
  - Inflation: stable in low single digits.
  - Current account deficit excluding grants: narrowed from 10.6 percent of GDP in 2018 to 5.8 percent of GDP in 2019.
  - International reserves: around 100 percent of Fund’s reserve adequacy metric.
  - Combined public sector deficit widened; public debt increased from 76.3 percent of GDP in 2018 to 79.3 percent of GDP in 2019.
  - On March 25, Executive Board approved a four-year EFF with access of SDR 926.37 million (270 percent of quota).

### Impact of the shock — Key projections, losses, and fiscal account impacts
- Macroeconomic projections:
  - GDP contraction: staff projects GDP to contract by 3.4 percent in 2020 (compared to pre-COVID projection of 2.1 percent growth).
  - GDP rebound: projected to rebound in 2021 by 3.6 percent.
  - Two-year output loss: about 4 percent compared to the pre-COVID baseline.
  - Level of GDP: projected to remain lower in the medium term.
- Balance of payments and reserves:
  - Current account: projected to deteriorate markedly versus pre-COVID due to declines in tourism, remittances, exports, lower oil prices and reduced FDI.
  - Shock severity: most severe during Q2 2020.
  - Government assumption: will not be able to issue a new Eurobond to offset the maturing $1.25 billion Eurobond in 2020 given increased sovereign spreads.
  - With gross reserves maintained lower than in the EFF but slightly above adequacy metric, balance of payments gap is around $1.5 billion in 2020.
- Fiscal account selected figures (EFF vs Current Proj. Difference, JD bil. and % GDP):
  - Total revenue and grants: 8.71 JD bil. / 26.97% GDP (EFF) -> 7.10 JD bil. / 23.35% GDP (Current Proj.) -> -1.61 JD bil. / -3.62% GDP (Difference).
  - Tax revenue: 5.65 JD bil. / 17.48% GDP -> 4.54 JD bil. / 14.92% GDP -> -1.11 JD bil. / -2.56% GDP.
  - Nontax revenue: 2.05 JD bil. / 6.34% GDP -> 1.54 JD bil. / 5.07% GDP -> -0.50 JD bil. / -1.26% GDP.
  - Current expenditure: 8.42 JD bil. / 26.06% GDP -> 8.18 JD bil. / 26.88% GDP -> -0.24 JD bil. / 0.83% GDP.
  - Capital expenditure: 1.27 JD bil. / 3.94% GDP -> 0.99 JD bil. / 3.27% GDP -> -0.28 JD bil. / -0.67% GDP.
  - Overall central government balance: -0.98 JD bil. / -3.02% GDP -> -2.07 JD bil. / -6.81% GDP -> -1.09 JD bil. / -3.78% GDP.
  - Combined public balance: -1.30 JD bil. / -4.03% GDP -> -2.53 JD bil. / -8.32% GDP -> -1.23 JD bil. / -4.29% GDP.
- Utilities impacts:
  - NEPCO operating balance: -0.16 JD bil. / -0.49% GDP (EFF) -> -0.17 JD bil. / -0.55% GDP (Current Proj.) — Difference -0.01 JD bil. / -0.06% GDP.
  - WAJ overall balance: -0.36 JD bil. / -1.11% GDP (EFF) -> -0.35 JD bil. / -1.15% GDP (Current Proj.) -> 0.01 JD bil. / -0.04% GDP.
  - Water companies overall balance: -0.04 JD bil. / -0.13% GDP -> -0.18 JD bil. / -0.58% GDP -> -0.13 JD bil. / -0.45% GDP.
  - Additional water distribution losses due to COVID-19: 0.5 percent of GDP (0.2 percent of GDP from increased water supply and 0.3 percent of GDP from reduced bill collection).
- Domestic arrears securitized by authorities: 2.3 and 0.3 percent of GDP in 2019 and early 2020, respectively.

### Downside and upside risks
- Downside risks:
  - Large uncertainty about duration of COVID-19; a longer-lasting pandemic or a second wave would deepen crisis and delay recovery.
  - Domestically could cause lower activity, lower budget revenue, higher spending needs, worsened utilities operational balances, delayed fiscal consolidation, constrained market access, and higher debt sustainability risks.
- Mitigants and upside:
  - Authorities’ commitment to EFF objectives and readiness to recalibrate policies.
  - Additional concessional donor financing would be essential.
  - Faster normalization of international financial market conditions might allow Eurobond issuance in the second half of the year to finance any residual gap.

### Staff appraisal and policy recommendations
- Short-term priorities:
  - Provide timely, temporary, and targeted support to minimize output and job losses.
  - Use limited fiscal space prudently: prioritize health spending, targeted cash support, and support to firms critical to preserving employment and productive capacity.
  - Preserve transparency and accountability for emergency spending.
- Medium-term priorities:
  - Resume gradual fiscal consolidation as the crisis abates.
  - Accelerate structural reforms to rebuild buffers and support growth, in line with EFF objectives.
  - Contain accumulation of arrears in water and electricity sectors through proper budgeting, cash management, timely budget transfers to WAJ, and close monitoring of payments.
  - Implement reforms to contain NEPCO’s losses: improve bill collection, targeted rebates to boost domestic demand, and introduce fixed fees for grid-connected renewable energy systems.
- Monetary and financial sector guidance:
  - Continue liquidity support while limiting pressure on international reserves and safeguarding financial stability.
  - Maintain prudential regulation and accounting standards aligned with best practices.

### Fiscal consolidation and medium-term stance (authorities’ commitments)
- Program built on cumulative fiscal measures of about 3.8 percent of GDP during the program period; these measures "would still be sufficient to achieve a fiscal surplus by 2024 and gradually reduce public debt to 80 percent of GDP by 2025" despite the 2020 increase.
- Pace of fiscal consolidation "may need to be reconsidered at the time of first EFF review" depending on pandemic containment and growth.
- Authorities plan to resume fiscal consolidation from 2021 by:
  - cutting lower priority spending,
  - curtailing tax exemptions,
  - reducing evasion,
  - strengthening tax and customs administration.

### Public debt and sustainability projections (selected)
- Public debt: assessed sustainable but risks intensified.
- Public debt projections:
  - Public debt projected to reach 88.5 percent of GDP in 2020.
  - Public debt projected to start declining in 2022 to about 80 percent of GDP by 2025.
- Public debt definition: consolidated central government, NEPCO, WAJ, water distribution companies, and Social Security Corporation and includes public guarantees.
- Public DSA baseline nominal gross public debt (percent of GDP; selected):
  - 2018: 71.8
  - 2019: 76.3
  - 2020: 79.3
  - 2021: 88.5
  - 2022: 88.6
  - 2023: 87.3
  - 2024: 85.5
  - 2025: 82.4
  - 2026: 79.6
- Public gross financing needs (percent of GDP; selected):
  - 2018: 26.0
  - 2019: 17.9
  - 2020: 14.3
  - 2021: 18.6
  - 2022: 15.5
  - 2023: 14.8
  - 2024: 13.6
  - 2025: 11.2
  - 2026: 12.1

### External sector and balance of payments — Key indicators (selected)
- Current account balance (including grants, $ millions): -2,971 (2018), -1,232 (2019), -1,449 (2020), -2,530 (2020 EFF), -1,730 (2021), -2,192 (2021 EFF).
- Exports f.o.b. ($ billions): 7.757 (2018), 8.325 (2019), 8.735 (2020), 7.329 (2020 EFF), 9.174 (2021).
- Imports f.o.b. ($ billions): 18.078 (2018), 17.224 (2019), 18.055 (2020), 15.432 (2020 EFF), 18.391 (2021).
- Gross usable international reserves ($ millions): 12,513 (2018), 13,512 (2019), 15,307 (2020), 14,211 (2020 EFF), 16,991 (2021).
- Gross usable reserves in months of prospective imports: 6.8 (2018), 8.3 (2019), 7.7 (2020), 8.2 (2020 EFF), 8.3 (2021).

### Monetary and financial sector projections (selected)
- Broad money (JD millions): 33,356 (2018), 34,968 (2019), 38,303 (2020), 35,253 (2020 EFF), 40,815 (2021).
- Year-on-year broad money growth (percent): 1.3 (2018), 4.8 (2019), 7.5 (2020), 0.8 (2020 EFF), 6.6 (2021).
- Net international reserves ($ millions): 11,430 (2018), 12,756 (2019), 14,462 (2020), 12,964 (2020 EFF), 15,879 (2021).

### Program financing and identified external support
- RFI purchase: 85 percent of quota, about $400 million, covering about one quarter of the $1.5 billion financing gap.
- Other identified financing/support:
  - World Bank approved COVID-19 emergency support of $20 million and is considering an additional loan of $250 million (part available during 2020).
  - EC offered an increase in macrofinancial assistance (MFA) of €200 million.
- Authorities plan to fill remainder of gap by:
  - seeking additional bilateral donor financing,
  - borrowing externally when market conditions improve,
  - or targeting a smaller increase in reserves.
- Given the link between external and fiscal needs, the RFI purchase will be on-lent to the budget.

### Annex I — Public and External Debt Sustainability: risks, scenarios, and stress tests
- Overall DSA assessment:
  - Public debt sustainable provided exchange rate peg maintained, shock is transitory, authorities remain committed to EFF consolidation, and committed donor/market financing mobilized.
  - Debt projected to peak at 88.6 percent of GDP in 2021 and decline to about 80 percent of GDP by 2025.
- Key drivers of higher debt path:
  - fiscal loosening in 2020; higher deficits; weaker growth.
- Debt structure and mitigants:
  - Domestic debt maturity (excluding treasury bills): average maturity almost doubled to six years since 2018.
  - External public debt maturity at issuance typically more than five years.
  - Favorable composition with sizable share of concessional borrowing under the Jordan Compact and the 2019 London Initiative.
  - Jordanian banks’ favorable profitability, liquidity and provisioning mitigate rollover risks.
- Stress tests considered:
  - Primary Balance Shock; Real GDP Growth Shock; Real Interest Rate Shock; Real Exchange Rate Shock; Combined Shock.
  - Outcome: gross nominal public debt and public gross financing needs peak higher than baseline under stress scenarios.
- External DSA bound tests and scenarios:
  - One-time real depreciation of 30 percent in 2020 considered in specific external scenarios.
  - Combined shock applies permanent 1/4 standard deviation shocks to real interest rate, growth rate, and current account balance.

### Appendix I — Letter of Intent: authorities’ commitments and measures
- COVID-19 status as of May 12: 576 confirmed cases and 9 deaths.
- Immediate containment measures: stopped air passenger traffic, closed land borders, suspended movement across governorates, mandatory quarantines and curfew, suspended public and private sector operations except critical sectors.
- Requested emergency financing: RFI SDR 291.55 million (85 percent of quota); subsequent statement notes SDR 292 million equivalent to 85 percent of quota.
- Emergency fiscal and administrative measures (selected):
  - Decreased salaries of cabinet members and senior officials; delayed wage increases; suspended overtime bonuses and allowances for higher paid employees; suspended monthly fuel, travel and transportation allowances; hiring freeze in government entities and SOEs.
  - CBJ reduced policy rates by 150 basis points; injected liquidity equal to 1.8 percent of GDP; allowed loan rescheduling; enhanced refinancing program and created new program for small businesses; directed banks to postpone 2020 profit distributions.
- Governance commitments for RFI funds:
  - Create budget lines, link fund to TSA, publish procurement and awarded contracts including beneficial ownership, ex-post audits by Audit Bureau to be published within 6 months from end of fiscal year.
- Medium-term intentions:
  - Remain committed to EFF reforms; resume fiscal consolidation once COVID-19 effects abate; roll back temporary supports; reprioritize expenditure with focus on social safety nets; contain wage bill growth; broaden tax base.
- Authorities’ statement (May 20, 2020):
  - Lockdown lasted two months; containment effective in saving lives.
  - As of May 20, 2020: 613 cases, 408 recovered, 9 deaths.
  - Growth projection for 2020 reduced by 5 percentage points; contraction forecast for the year.
  - Requested RFI: SDR 292 million (85 percent of quota) in the authorities’ statement; remainder of BoP gap expected to be covered by development partners and by targeting smaller accumulation of reserves than under the EFF.

*International Monetary Fund, May 13, 2020. Approved by Thanos Arvanitis (MCD) and Sanjaya Panth (SPR).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context
- Since the approval of the EFF arrangement the near-term economic outlook has worsened considerably due to the COVID-19 crisis and the strict lockdown measures to contain it.
- In 2020:
  - Output is expected to contract sharply.
  - Fiscal and external balances are expected to deteriorate.
  - Public debt is expected to increase.
  - A $1.5 billion balance of payments gap is expected to emerge.
- The authorities requested urgent support under the Fund’s Rapid Financing Instrument (RFI) because the first EFF review is several months away and an ad hoc augmentation is not feasible.
- Proposed RFI purchase:
  - SDR 291.55 million (85 percent of quota) — about $400 million.
  - This would cover about 1/4 of the financing need.
  - The rest is expected to be covered by Jordan’s development partners and by targeting smaller accumulation of reserves than under the EFF arrangement.

### Policy response
- Fiscal measures taken and their impacts:
  - The combined public sector deficit in 2020 is projected to increase by 3.2 percent of GDP compared to 2019, reflecting primarily lower revenues and higher spending on health and containment, and support to households and companies.
  - Domestic revenue is projected to decline by 12 percent in nominal terms (2 percentage points of GDP) compared to 2019.
  - Central government primary deficit is projected to increase by 2.2 percentage points of GDP compared to 2019.
  - Combined public sector deficit projected to widen by 3.2 percentage points of GDP to 8.3 percent of GDP in 2020.
- Specific fiscal actions taken or planned:
  - Established a fund to cover emergency medical outlays; exempted medical supplies from sales tax.
  - Temporary cash-flow relief: allowing delayed payments of sales taxes and customs duties within the year; electricity bills delayed until June.
  - Temporarily reduced social security contributions from 21.75 to 5.25 percent.
  - Temporarily reduced the maximum load tariff for electricity consumption of selected sectors.
  - Introduced a cash transfer program to support the unemployed and self-employed (0.3 percent of GDP) targeted to 200,000 most vulnerable households.
  - Temporarily reduced salaries to senior government officials, postponed increase in wages and allowances for all public sector employees until the end of 2020, imposed a hiring freeze on new positions.
  - Postponed non-priority investment; attempted savings in the wage bill, budgetary transfers, and non-essential investment.
- Monetary and financial sector actions:
  - The Central Bank of Jordan (CBJ) reduced policy rates by 150 basis points.
  - Injected liquidity into the system equivalent to 1.8 percent of GDP by reducing reserve requirements on time deposits from 7 percent to 5 percent.
  - Allowed rescheduling of loans and improved terms of existing refinancing programs for SMEs and introduced new ones.
  - CBJ will continue to balance adequate liquidity provision to banks with limiting pressure on international reserves and safeguarding financing stability.
  - Prudential regulations and accounting standards will remain aligned with best international practices.
- Transparency and accountability:
  - Authorities created specific budget lines to track and report crisis-related expenditure.
  - Linked the emergency fund to the Treasury Single Account.
  - Will publish on the government website procurement plans, notices and awarded contracts, including beneficial ownership of awarded entities, for the emergency responses.
  - Will undertake ex-post audits of all crisis-mitigating inflows and spending by the Jordanian Audit Bureau and will publish the results within 6 months from the end of the fiscal year.

### Debt sustainability and capacity to repay
- Staff assessment:
  - Risks have increased significantly, but public debt is still assessed as sustainable.
  - Reasons cited: a relatively large share of domestic and longer-term debt, and Jordan’s capacity to repay the Fund remains adequate.
- Strengthening factors:
  - Renewed fiscal consolidation and higher growth after the pandemic supported by structural reforms.
  - Continued support by multilateral and official bilateral creditors.
  - These will strengthen debt sustainability over the medium term.

### Eligibility for an RFI
- Jordan meets the requirements for an RFI:
  - Faces an urgent balance of payments need which cannot be covered without IMF financing and, if left unaddressed, could undermine macroeconomic stability.
  - Proposed access of 85 percent of quota (SDR 291.55 million) will keep access within normal limits.

### Background (pre-COVID-19)
- 2019 performance and EFF:
  - Real GDP growth was about 2 percent in 2019.
  - Inflation remained stable in low single digits.
  - Current account deficit excluding grants narrowed from 10.6 percent of GDP in 2018 to 5.8 percent of GDP in 2019.
  - International reserves were around 100 percent of Fund’s reserve adequacy metric.
  - The combined public sector deficit widened; public debt increased from 76.3 percent of GDP in 2018 to 79.3 percent of GDP in 2019.
  - On March 25, the Executive Board approved a four-year EFF arrangement with access of SDR 926.37 million (270 percent of quota).
  - The EFF aimed at strengthening macroeconomic stability and deepening structural reforms to raise potential growth.

### Impact of the shock — key projections and losses
- Macroeconomic projections and losses:
  - Staff projects GDP to contract by 3.4 percent in 2020 (compared to the pre-COVID projection of 2.1 percent growth).
  - GDP is projected to rebound in 2021 by 3.6 percent.
  - A two-year output loss of about 4 percent is expected compared to the pre-COVID baseline.
  - The level of GDP is projected to remain lower in the medium term.
- Balance of payments and reserves:
  - The current account is projected to deteriorate markedly versus the pre-COVID scenario due to declines in tourism, remittances, exports, lower oil prices and reduced FDI.
  - The shock and potential loss of reserves expected to be most severe during Q2 2020.
  - Staff assumes the government will not be able to issue a new Eurobond to offset the maturing $1.25 billion Eurobond in 2020 given increased sovereign spreads.
  - With gross reserves maintained at a lower level than in the EFF but still slightly above the adequacy metric, the balance of payments gap is around $1.5 billion in 2020.
- Box 1 — fiscal account impacts (selected figures preserved):
  - Combined public balance expected to deteriorate by JD 1.2 billion compared to the EFF request.
  - Sharp revisions to revenue projections: JD 1.6 billion difference; revenues preliminarily show a loss in the range of 20–40 percent for March and April.
  - For full year 2020 revenues are conservatively projected to come in 19 percent lower compared to the EFF projections.
  - Specific fiscal items (EFF vs Current Proj. Difference, JD bil. and % GDP):
    - Total revenue and grants: 8.71 JD bil. / 26.97% GDP (EFF) -> 7.10 JD bil. / 23.35% GDP (Current Proj.) -> -1.61 JD bil. / -3.62% GDP (Difference).
    - Tax revenue: 5.65 JD bil. / 17.48% GDP -> 4.54 JD bil. / 14.92% GDP -> -1.11 JD bil. / -2.56% GDP.
    - Nontax revenue: 2.05 JD bil. / 6.34% GDP -> 1.54 JD bil. / 5.07% GDP -> -0.50 JD bil. / -1.26% GDP.
    - Current expenditure: 8.42 JD bil. / 26.06% GDP -> 8.18 JD bil. / 26.88% GDP -> -0.24 JD bil. / 0.83% GDP.
    - Capital expenditure: 1.27 JD bil. / 3.94% GDP -> 0.99 JD bil. / 3.27% GDP -> -0.28 JD bil. / -0.67% GDP.
    - Overall central government balance: -0.98 JD bil. / -3.02% GDP -> -2.07 JD bil. / -6.81% GDP -> -1.09 JD bil. / -3.78% GDP.
    - Combined public balance: -1.30 JD bil. / -4.03% GDP -> -2.53 JD bil. / -8.32% GDP -> -1.23 JD bil. / -4.29% GDP.
  - Utilities impacts:
    - NEPCO operating balance projected to change from -0.16 JD bil. / -0.49% GDP (EFF) to -0.17 JD bil. / -0.55% GDP (Current Proj.) — Difference -0.01 JD bil. / -0.06% GDP.
    - WAJ overall balance: -0.36 JD bil. / -1.11% GDP (EFF) -> -0.35 JD bil. / -1.15% GDP (Current Proj.) -> 0.01 JD bil. / -0.04% GDP.
    - Water companies overall balance: -0.04 JD bil. / -0.13% GDP -> -0.18 JD bil. / -0.58% GDP -> -0.13 JD bil. / -0.45% GDP.
  - The COVID-19 crisis is expected to cause additional water distribution losses of 0.5 percent of GDP (0.2 percent of GDP from increased water supply and 0.3 percent of GDP from reduced bill collection).
  - Authorities securitized domestic arrears amounting to 2.3 and 0.3 percent of GDP in 2019 and early 2020, respectively.

### Downside and upside risks
- Downside risks:
  - Large uncertainty about the duration of the COVID-19 shock; a longer-lasting pandemic or a second wave would deepen the crisis and delay recovery.
  - Domestically could cause lower activity, lower budget revenue, higher spending needs, worsened utilities operational balances, delayed fiscal consolidation, constrained market access, and higher debt sustainability risks.
- Mitigants and upside:
  - Authorities’ commitment to EFF objectives and readiness to recalibrate policies.
  - Additional concessional donor financing would be essential.
  - Faster normalization of international financial market conditions might allow Eurobond issuance in the second half of the year to finance any residual gap.

### Staff appraisal / Policy recommendations (summarized)
- Short-term priorities:
  - Provide timely, temporary, and targeted support to minimize output and job losses.
  - Use limited fiscal space prudently: prioritize health spending, targeted cash support, and support to firms critical to preserving employment and productive capacity.
  - Preserve transparency and accountability for emergency spending.
- Medium-term priorities:
  - Resume gradual fiscal consolidation as the crisis abates.
  - Accelerate structural reforms to rebuild buffers and support growth, in line with EFF objectives.
  - Contain accumulation of arrears in water and electricity sectors through proper budgeting, cash management, timely budget transfers to WAJ, and close monitoring of payments.
  - Implement reforms to contain NEPCO’s losses: improve bill collection, targeted rebates to boost domestic demand, and introduce fixed fees for grid-connected renewable energy systems.
- Monetary and financial sector:
  - Continue liquidity support while limiting pressure on international reserves and safeguarding financial stability.
  - Maintain prudential regulation and accounting standards aligned with best practices.

_International Monetary Fund, May 13, 2020. Approved by Thanos Arvanitis (MCD) and Sanjaya Panth (SPR)._

### 11.      The authorities are also committed to return to the fiscal consolidation strategy

### 11.      The authorities are also committed to return to the fiscal consolidation strategy

### Fiscal consolidation and program stance
- The program was built on cumulative fiscal measures of about 3.8 percent of GDP during the program period.
- These measures "would still be sufficient to achieve a fiscal surplus by 2024 and gradually reduce public debt to 80 percent of GDP by 2025" despite the increase in 2020.
- The pace of fiscal consolidation "may need to be reconsidered at the time of first EFF review" in view of pandemic containment developments and Jordan’s growth trajectory.
- The authorities plan to resume fiscal consolidation from 2021 by:
  - cutting lower priority spending,
  - curtailing tax exemptions,
  - reducing evasion,
  - strengthening tax and customs administration.

### Public debt and sustainability
- Public debt is assessed to be sustainable, but risks have significantly intensified.
- Public debt is projected to reach 88.5 percent of GDP in 2020.
- Public debt is projected to start declining in 2022 to about 80 percent of GDP in 2025 as the economy and revenue return to normal and fiscal consolidation is renewed.
- Risks stemming from the elevated debt burden are mitigated by:
  - the large share of domestic and long-term debt,
  - the authorities’ commitments to sound policies,
  - continued strong support from multilateral and bilateral donors, including from the World Bank and the EC.
- Public debt is defined as the consolidated central government, NEPCO, WAJ, water distribution companies, and Social Security Corporation and includes public guarantees.

### Monetary and financial sector policies
- "The current monetary policy stance is broadly appropriate."
- The foreign exchange market has been stable and CBJ’s interventions to support the dinar have been limited.
- The peg remains an important nominal anchor and CBJ’s international reserves are adequate.
- The purchase under the RFI and the higher external financing "will provide an additional reserve cushion."
- The CBJ will continue to balance provision of liquidity to support credit and financial sector stability with limiting pressures on its international reserves.
- Policy actions already taken:
  - reduced policy rates by 150 basis points (following similar rate cuts by the US Fed),
  - reduced reserve requirements for banks by 200 basis points.
- Future monetary policy actions will be informed by developments in market liquidity, deposit dollarization and inflation expectations.

### Financial stability risks and supervisory measures
- Financial stability risks have increased but "appear manageable."
- Potential risks include asset quality deterioration, loan rescheduling and payment deferrals, deposit withdrawals affecting bank liquidity and capital.
- Staff supports CBJ’s measures:
  - postponement of profit distribution by banks to add capital and liquidity buffers,
  - debt rescheduling to viable borrowers,
  - CBJ’s readiness to exercise flexibility in applying prudential regulations while keeping prudential and accounting standards aligned with best international practices.

### Modalities of support and financing
- The purchase under the RFI is proposed in the amount of 85 percent of quota, or about $400 million.
- The RFI would cover about one quarter of Jordan’s $1.5 billion financing gap and catalyze donor support.
- Other identified financing and support figures:
  - World Bank approved COVID-19 emergency support of $20 million and is considering an additional loan of $250 million (part available during 2020),
  - EC has offered Jordan an increase in macrofinancial assistance (MFA) of €200 million.
- These would help avoid a decline in reserves.
- The authorities plan to fill the rest of the gap by:
  - seeking additional bilateral donor financing,
  - borrowing externally when market conditions improve sufficiently,
  - or targeting a smaller increase in reserves.
- Given the link between external and fiscal needs and to provide additional fiscal space for pandemic-related spending, "the RFI purchase will be on-lent to the budget."
- An update safeguards assessment is in progress, expected to be completed before the first review of the EFF arrangement.
- A Memorandum of Understanding between the CBJ and the Ministry of Finance on servicing respective obligations to the Fund is being updated; the authorities' commitment to amend the MOU is included in the LOI.

### Capacity to repay and Fund exposure
- Fund credit outstanding will peak in 2023 at 3.3 percent of GDP.
- Peak exposure equivalents:
  - around 9 percent of exports of goods and services,
  - 10 percent of gross usable reserves.
- EFF repurchases and charges peak at 1.8 percent of gross usable reserves and reach 1.5 percent of exports of goods and services in 2024.

### Staff appraisal: macroeconomic impact and policy response
- Jordan is experiencing an immediate and urgent balance of payments need due to the COVID-19 shock.
- Output is projected to contract in 2020 due to suspension of tourism, lower remittances and exports, and a slowdown in domestic activity due to the lockdown.
- Staff projects an external financing gap of about $1.5 billion in 2020.
- The authorities' response has been timely, transparent, targeted and temporary, including:
  - implementing an effective lockdown,
  - creating an emergency fund for necessary medical outlays,
  - launching a targeted stimulus package (deferral of payments of sales taxes, customs duties, and electricity bills; temporary reduction in social security contributions; cash transfers to the unemployed and self-employed; rescheduling of loans; financing programs for SMEs).
- The CBJ provided adequate liquidity to the market.
- The authorities are committed to transparency of emergency spending and plan to reverse crisis-mitigation measures after the pandemic passes and the economy starts to recover.
- To place public debt on a downward trajectory, fiscal consolidation should resume from 2021 at a pace to be determined at the time of the first review of the EFF-supported program.
- The authorities remain committed to the objectives of the EFF arrangement and the timely completion of program reviews; specific targets and policies will be recalibrated during the upcoming review.
- Implementing structural reforms to strengthen competitiveness is critical to achieve high and inclusive growth and to create jobs.

*Source: IMF staff report chapter excerpt.*

### 21.      Staff supports the proposed purchase under the RFI. Jordan meets the eligibility

### 21.      Staff supports the proposed purchase under the RFI. Jordan meets the eligibility

### Eligibility and IMF Action
- Staff supports the proposed purchase under the RFI.
- "Jordan meets the eligibility requirements, its debt is sustainable with continued strong policy implementation, and its capacity to repay the Fund remains adequate."

### Macroeconomic outlook and key projections (selected)
- Real GDP at market prices: 1.92.0 (2018), 2.1 (2019), -3.4 (2020), 2.3 (2021), 3.62.6 (2021/2022), 3.52.9 (2022), 3.3 (2023), 3.13.33.3 (2023/2024), 3.3 (2024), 3.13.3 (2024/2025)
- GDP deflator at market prices: 1.81.7 (2018), 1.91.2 (2019), 2.5 (2020), 2.2 (2021), 2.52.5 (2021/2022 through projections)
- Nominal GDP at market prices (JD millions): 29,984 (2018), 31,099 (2019), 32,313 (2020), 30,413 (2020 EFF), 33,882 (2021), 32,210 (2021 EFF), 35,632 (2022), 34,173 (2022 EFF), 37,582 (2023), 36,199 (2023 EFF), 39,716 (2024), 38,323 (2024 EFF), 40,577 (2025)
- Nominal GDP at market prices ($ millions): 42,291 (2018), 43,863 (2019), 45,575 (2020), 42,896 (2020 EFF), 47,789 (2021), 45,430 (2021 EFF), 50,257 (2022), 48,199 (2022 EFF), 53,008 (2023), 51,057 (2023 EFF), 56,017 (2024), 54,052 (2024 EFF), 57,232 (2025)
- Consumer price inflation (annual average): 4.5 (2018), 0.3 (2019), 1.5 0.2 1.7 1.6 2.5 2.5 ... (projections showing 2.5 levels)
- Unemployment rate (period average, percent): 18.6 (2018), 19.1 (2019) — methodology note: "The Department of Statistics changed the methodology ... in 2017 ... The variable now reports unemployment rates for Jordanians only (excluding foreigners)."

### Fiscal position and projections (central government summary)
- Total revenue and grants (percent of GDP): 26.1 (2018), 24.7 (2019), 27.0 (2020), 23.3 (2020 EFF), 26.0 (2021), 24.9 (2021 EFF), 25.5 (2022), 25.0 (2022 EFF), 24.5 (2023), 24.0 (2023 EFF), 24.3 (2024), 23.8 (2024 EFF), 23.6 (2025)
- Grants (percent of GDP): 3.0 (2018), 2.5 (2019), 3.2 (2020), 3.4 (2020 EFF), 2.2 (2021), 2.3 (2021 EFF), 1.9 (2022), 1.9 (2022 EFF), 1.0 (2023), 1.1 (2023 EFF), 1.0 (2024), 1.0 (2024 EFF), 0.9 (2025)
- Total expenditures, inc. other use of cash (percent of GDP): 29.8 (2018), 29.6 (2019), 30.0 (2020), 30.2 (2020 EFF), 30.2 (2021), 31.0 (2021 EFF), 29.9 (2022), 30.8 (2022 EFF), 29.6 (2023), 30.5 (2023 EFF), 29.3 (2024), 30.1 (2024 EFF), 29.9 (2025)
- Interest payments (percent of GDP): 3.3 (2018), 3.7 (2019), 3.9 (2020), 4.1 (2020 EFF), 4.0 (2021), 4.0 (2021 EFF), 3.9 (2022), 4.0 (2022 EFF), 3.3–4.0 (subsequent years at similar levels)
- Overall fiscal balance after fiscal measures (percent of GDP): -3.3 (2018), -5.0 (2019), -3.0 (2020), -6.8 (2020 EFF), -3.4 (2021), -4.7 (2021 EFF), -3.1 (2022), -3.6 (2022 EFF), -3.3 (2023), -3.5 (2023 EFF), -2.6 (2024), -2.5 (2024 EFF), -2.6 (2025)
- Government and guaranteed gross debt (percent of GDP): 94.4 (2018), 98.9 (2019), 100.4 (2020), 110.7 (2020 EFF), 100.7 (2021), 111.1 (2021 EFF), 100.2 (2022), 110.0 (2022 EFF), 99.6 (2023), 108.4 (2023 EFF), 98.0 (2024), 105.5 (2024 EFF), 103.0 (2025)
- Government and guaranteed gross debt (JD millions): 28,308 (2018), 30,768 (2019), 32,428 (2020), 33,657 (2020 EFF), 34,112 (2021), 35,791 (2021 EFF), 35,697 (2022), 37,587 (2022 EFF), 37,432 (2023), 39,253 (2023 EFF), 38,908 (2024), 40,447 (2024 EFF), 41,786 (2025)
- Government and guaranteed gross debt, net of SSC's holdings (percent of GDP): 76.3 (2018), 79.3 (2019), 79.9 (2020), 88.5 (2020 EFF), 79.7 (2021), 88.6 (2021 EFF), 78.7 (2022), 87.3 (2022 EFF), 77.8 (2023), 85.5 (2023 EFF), 75.8 (2024), 82.4 (2024 EFF), 79.6 (2025)

### External sector and balance of payments
- Current account balance (including grants, $ millions): -2,971 (2018), -1,232 (2019), -1,449 (2020), -2,530 (2020 EFF), -1,730 (2021), -2,192 (2021 EFF), -1,792 (2022), -2,061 (2022 EFF), -1,887 (2023), -2,181 (2023 EFF), -1,740 (2024), -1,999 (2024 EFF), -1,758 (2025)
- Trade balance ($ millions): -10,321 (2018), -8,900 (2019), -9,320 (2020), -8,103 (2020 EFF), -9,217 (2021), -8,144 (2021 EFF), -9,356 (2022), -8,502 (2022 EFF), -9,460 (2023), -8,726 (2023 EFF), -9,534 (2024), -8,951 (2024 EFF), -9,154 (2025)
- Exports f.o.b. ($ billions): 7.757 (2018), 8.325 (2019), 8.735 (2020), 7.329 (2020 EFF), 9.174 (2021), 8.112 (2021 EFF), 9.724 (2022), 8.709 (2022 EFF), 10.311 (2023), 9.353 (2023 EFF), 10.960 (2024), 10.005 (2024 EFF), 10.708 (2025)
- Imports f.o.b. ($ billions): 18.078 (2018), 17.224 (2019), 18.055 (2020), 15.432 (2020 EFF), 18.391 (2021), 16.256 (2021 EFF), 19.080 (2022), 17.211 (2022 EFF), 19.771 (2023), 18.079 (2023 EFF), 20.494 (2024), 18.956 (2024 EFF), 19.861 (2025)
- Energy imports ($ billions): 3.754 (2018), 3.064 (2019), 3.201 (2020), 2.001 (2020 EFF), 3.007 (2021), 2.164 (2021 EFF), 3.131 (2022), 2.429 (2022 EFF), 3.188 (2023), 2.597 (2023 EFF), 3.253 (2024), 2.750 (2024 EFF), 2.894 (2025)
- Gross usable international reserves ($ millions): 12,513 (2018), 13,512 (2019), 15,307 (2020), 14,211 (2020 EFF), 16,991 (2021), 14,897 (2021 EFF), 17,860 (2022), 15,441 (2022 EFF), 17,885 (2023), 16,325 (2023 EFF), 18,612 (2024), 17,017 (2024 EFF), 17,780 (2025)
- Gross usable reserves in months of prospective imports: 6.8 (2018), 8.3 (2019), 7.7 (2020), 8.2 (2020 EFF), 8.3 (2021), 8.0 (2021 EFF), 8.4 (2022), 7.9 (2022 EFF), 8.1 (2023), 8.0 (2023 EFF), 8.0 (2024), 7.9 (2024 EFF), 7.9 (2025)
- Current account (percent of GDP): -7.0 (2018), -2.8 (2019), -3.2 (2020), -5.9 (2020 EFF), -3.6 (2021), -4.8 (2021 EFF), -3.6 (2022), -4.3 (2022 EFF), -3.6 (2023), -4.3 (2023 EFF), -3.1 (2024), -3.7 (2024 EFF), -3.1 (2025)
- Total external debt (percent of GDP): 69.0 (2018), 68.8 (2019), 71.9 (2020), 76.7 (2020 EFF), 72.6 (2021), 76.3 (2021 EFF), 71.4 (2022), 74.4 (2022 EFF), 69.7 (2023), 74.6 (2023 EFF), 67.7 (2024), 71.6 (2024 EFF), 68.1 (2025)

### External financing and reserve dynamics
- Gross Financing Requirements ($ millions): 5,508 (2018), 4,475 (2019), 5,037 (2020), 6,118 (2020 EFF), 3,438 (2021), 3,899 (2021 EFF), 4,468 (2022), 4,736 (2022 EFF), 4,601 (2023), 4,893 (2023 EFF), 3,506 (2024), 3,763 (2024 EFF), 3,981 (2025)
- Identified official public external financing (after RFI): 568 (2018), 1,425 (2019), 2,689 (2020), 3,186 (2020 EFF), 1,462 (2021), 1,309 (2021 EFF), 867 (2022), 914 (2022 EFF), 767 (2023), 762 (2023 EFF), 517 (2024), 509 (2024 EFF), 246 (2025)
- Memorandum: Gross usable reserves (USD millions): 12,513 (2018), 13,512 (2019), 15,307 (2020), 14,211 (2020 EFF), 16,991 (2021), 14,897 (2021 EFF), 17,860 (2022), 15,441 (2022 EFF), 17,870 (2023), 16,325 (2023 EFF), 18,580 (2024), 17,017 (2024 EFF), 17,780 (2025)

### Monetary sector and central bank (selected)
- Broad money (JD millions): 33,356 (2018), 34,968 (2019), 38,303 (2020), 35,253 (2020 EFF), 40,815 (2021), 37,970 (2021 EFF), 43,412 (2022), 40,778 (2022 EFF), 46,179 (2023), 43,726 (2023 EFF), 49,355 (2024), 46,728 (2024 EFF), 50,178 (2025)
- Year-on-year broad money growth (percent): 1.3 (2018), 4.8 (2019), 7.5 (2020), 0.8 (2020 EFF), 6.6 (2021), 7.7 (2021 EFF), 6.4 (2022), 7.4 (2022 EFF), 6.4 (2023), 7.2 (2023 EFF), 6.9 (2024), 6.9 (2024 EFF), 7.4 (2025)
- Net foreign assets (CBJ, JD millions): 9,097 (2018), 9,975 (2019), 11,302 (2020), 10,209 (2020 EFF), 12,395 (2021), 10,598 (2021 EFF), 12,862 (2022), 10,836 (2022 EFF), 13,545 (2023), 12,204 (2023 EFF), 14,037 (2024), 12,814 (2024 EFF), 13,541 (2025)
- Net international reserves ($ millions): 11,430 (2018), 12,756 (2019), 14,462 (2020), 12,964 (2020 EFF), 15,879 (2021), 13,383 (2021 EFF), 16,485 (2022), 13,663 (2022 EFF), 16,259 (2023), 14,400 (2023 EFF), 16,907 (2024), 15,216 (2024 EFF), 16,194 (2025)

### Public utilities and contingent fiscal pressures
- NEPCO operating balance (percent of GDP): -0.3 (2018), 0.0 (2019), -0.5 (2020), -0.6 (2020 EFF), -0.6 (2021), -0.9 (2021 EFF), -0.5 (2022), -0.7 (2022 EFF), -0.4 (2023), -0.6 (2023 EFF), -0.4 (2024), -0.6 (2024 EFF), -0.6 (2025)
- WAJ overall balance (percent of GDP, excluding project grants): -0.9 (2018), -1.1 (2019), -1.1 (2020), -1.2 (2020 EFF), -0.8 (2021), -0.9 (2021 EFF), -0.8 (2022), -0.9 (2022 EFF), -0.8 (2023), -0.9 (2023 EFF), -0.7 (2024), -0.8 (2024 EFF), -0.7 (2025)
- Water Distribution Companies overall balance (percent of GDP): 0.0 (2018), -0.2 (2019), -0.1 (2020), -0.6 (2020 EFF), -0.1 (2021), -0.2 (2021 EFF), -0.1 (2022), -0.2 (2022 EFF), -0.1 (2023), -0.1 (2023 EFF), -0.1 (2024), -0.1 (2024 EFF), -0.1 (2025)

### Program financing and Fund credit indicators
- Program financing (IMF and others, $ millions): Program financing (+ = increase) entries include 751, 1,012, 2,493, 3,744, 1,444, 1,292, 843, 890, 729, 1,788, 452, 241, 31 across projection years shown.
- Table 5 (Indicators of Fund Credit) shows disbursements and stock of Fund credit in SDR and multiple ratios (end-period) — stock of existing and prospective Fund credit (SDR million): 543.4 (2019), 365.1 (2020), 720.5 (2021), 913.5 (2022), 1,102.2 (2023), 1,208.0 (2024), 1,119.4 (2025), with related obligations and memorandum ratios provided.

*Sources: Jordanian authorities; and IMF staff estimates and projections.*

### Annex I. Public and External Debt Sustainability

### Annex I. Public and External Debt Sustainability

### Overall Assessment
- Jordan’s public debt is assessed as sustainable under the premises that:
  - the exchange rate peg is maintained;
  - the shock is transitory;
  - the authorities remain committed to the fiscal consolidation path in the EFF;
  - the authorities can mobilize committed donor and market financing.
- The debt level is projected to be higher than at the time of the EFF approval but to steadily decline in the medium term, assisted by fiscal consolidation and a rebound in growth.
- Risks to debt sustainability are substantial and stem from:
  - elevated debt burden and high gross financing needs amidst impaired international market access in the near-term;
  - great uncertainty with respect to macroeconomic developments.
- Risk mitigants include a favorable debt structure with long maturities and a high share of concessional financing committed under the Jordan Compact and the London Initiative.

### Public Debt Projections and Path
- Definition: public debt in this DSA is the consolidated gross direct and guaranteed debt of the central government and the state-owned Social Security Corporation.
- Key projection points:
  - Public debt is projected to peak at 88.6 percent of GDP in 2021.
  - Public debt is projected to decline to about 80 percent of GDP by 2025.
  - This level is above the 70 percent high-risk MAC DSA benchmark.
- Drivers of the higher-than-previously-projected debt path:
  - fiscal loosening in 2020;
  - higher deficits going forward;
  - weaker economic growth.
- Outlook:
  - Given the temporary nature of the shock and authorities’ intentions to restart fiscal consolidation once the effects of the outbreak abate, debt to GDP is projected to remain on a downward path.

### Structure of Public Debt
- Domestic debt maturity:
  - Excluding treasury bills, average maturity has almost doubled to six years since 2018.
- External public debt:
  - Maturity at issuance typically more than five years (external public debt profile on the longer end).
- Composition:
  - Favorable due to a sizable share of concessional borrowing, including pledges made as part of the Jordan Compact and the 2019 London Initiative.
- Banking sector:
  - Jordanian banks’ favorable profitability, liquidity and provisioning indicators help mitigate rollover risks.

### Risks to Debt Sustainability
- Indicators:
  - Public debt level and gross financing needs (GFNs) breach the high-risk benchmarks under the baseline.
- Coverage and mitigation:
  - GFNs are covered by committed concessional financing and rollovers from domestic investors.
  - GFNs are projected to decline over the medium term, in line with shift to longer-term domestic issuance, official financing, and envisaged fiscal consolidation under the EFF.
- Potential amplifiers of risk:
  - a longer lasting pandemic;
  - weaker fiscal consolidation effort.
- External vulnerabilities:
  - External financing requirements have increased, reflecting higher current account deficits than previously projected.
  - Tightening global financing conditions create uncertainty about Jordan’s near-term ability to refinance Eurobonds at acceptable rates.
  - External debt remains vulnerable to current account and real exchange rate shocks.
- Policy imperatives:
  - Gradual fiscal consolidation and sustained, or preferably stepped-up, access to concessional financing are both critical to stabilize the interest burden.

### Public DSA—Baseline Scenario (selected projections and indicators; all values in percent of GDP unless otherwise indicated; as of May 05, 2020)
- Nominal gross public debt:
  - 2018: 71.8
  - 2019: 76.3
  - 2020: 79.3
  - 2021: 88.5
  - 2022: 88.6
  - 2023: 87.3
  - 2024: 85.5
  - 2025: 82.4
  - 2026: 79.6 (note: table shows through 2025; 79.6 appears as final column label)
- Public gross financing needs:
  - 2018: 26.0
  - 2019: 17.9
  - 2020: 14.3
  - 2021: 18.6
  - 2022: 15.5
  - 2023: 14.8
  - 2024: 13.6
  - 2025: 11.2
  - 2026: 12.1 (as displayed)
- Real GDP growth (in percent):
  - 2018: 2.7
  - 2019: 1.9
  - 2020: 2.0
  - 2021: -3.4
  - 2022: 3.6
  - 2023: 3.5
  - 2024: 3.3
  - 2025: 3.3
  - 2026: 3.3 (as displayed)
- Inflation (GDP deflator, in percent):
  - 2018: 4.2
  - 2019: 1.8
  - 2020: 1.7
  - 2021: 1.2
  - 2022: 2.2
  - 2023: 2.5
  - 2024: 2.5
  - 2025: 2.5
- Nominal GDP growth (in percent):
  - 2018: 7.0
  - 2019: 3.7
  - 2020: 3.7
  - 2021: -2.2
  - 2022: 5.9
  - 2023: 6.1
  - 2024: 5.9
  - 2025: 5.9
- Effective interest rate (in percent):
  - 2018: 4.9
  - 2019: 4.2
  - 2020: 4.5
  - 2021: 4.5
  - 2022: 4.0
  - 2023: 4.0
  - 2024: 4.0
  - 2025: 4.0
  - 2026: 4.2 (as displayed)
- Change in gross public sector debt (cumulative):
  - 2018: 2.0
  - 2019: -1.0
  - 2020: 3.0
  - 2021: 9.2
  - 2022: 0.2
  - 2023: -1.3
  - 2024: -1.8
  - 2025: -3.1
  - 2026: -2.8
  - cumulative: 0.4
- Identified debt-creating flows (selected):
  - Primary deficit:
    - 2018: 3.3
    - 2019: -1.8
    - 2020: -0.5
    - 2021: 1.8
    - 2022: -0.4
    - 2023: -1.6
    - 2024: -1.8
    - 2025: -2.7
    - 2026: -2.6
    - cumulative: -7.3
  - Revenues and grants:
    - 2018: 35.6
    - 2019: 38.6
    - 2020: 36.9
    - 2021: 35.8
    - 2022: 38.4
    - 2023: 38.8
    - 2024: 38.1
    - 2025: 38.2
    - 2026: 37.8
    - cumulative: 227.2
  - Primary expenditures (selected entries shown):
    - 2018: 38.9
    - 2019: 36.8
    - 2020: 36.4
    - 2021: 37.6
    - 2022: 38.0
    - 2023: 37.2
    - 2024: 36.4
    - 2025: 35.5
    - cumulative: 219.9
- Automatic debt dynamics (interest rate/growth differential and components):
  - Interest rate/growth differential:
    - 2018: -1.2
    - 2019: 0.9
    - 2020: 1.1
    - 2021: 5.5
    - 2022: -1.1
    - 2023: -1.3
    - 2024: -1.1
    - 2025: -1.0
    - 2026: -0.9
    - cumulative: 0.0
  - Of which: real interest rate (selected):
    - 2018: 0.6
    - 2019: 2.4
    - 2020: 2.6
    - 2021: 2.7
    - 2022: 1.9
    - 2023: 1.6
    - 2024: 1.6
    - 2025: 1.7
    - cumulative: 11.1
  - Of which: real GDP growth contribution:
    - 2018: -1.8
    - 2019: -1.4
    - 2020: -1.5
    - 2021: 2.8
    - 2022: -3.0
    - 2023: -2.9
    - 2024: -2.8
    - 2025: -2.6
    - cumulative: -11.1
- Other identified debt-creating flows and residuals:
  - Other identified debt-creating flows (includes off-budget project loans, repurchases under the 2016 EFF, and SSC's investments in non-government debt and equity):
    - 2018: 0.4
    - 2019: 0.4
    - 2020: 1.1
    - 2021: 1.1
    - 2022: 1.5
    - 2023: 1.5
    - 2024: 1.2
    - 2025: 0.9
    - cumulative: 7.1
  - Residual, including asset changes:
    - 2018: -0.5
    - 2019: -0.6
    - 2020: 1.3
    - 2021: 0.8
    - 2022: 0.2
    - 2023: 0.2
    - 2024: -0.1
    - 2025: -0.3
    - cumulative: 0.6

### Alternative Scenarios and Composition
- Baseline, Historical, and Constant Primary Balance scenarios are presented with differing assumptions:
  - Example underlying assumptions (selected):
    - Baseline real GDP growth: 2020: -3.4; 2021: 3.6; 2022: 3.5; 2023: 3.3; 2024: 3.3
    - Constant Primary Balance scenario primary balance: -1.8 (persisting across 2020–2025 in scenario table)
    - Effective interest rate in Constant Primary Balance scenario rises from 4.5 to 5.1 across projections (scenario table shows 4.5, 4.9, 4.8, 4.9, 5.0, 5.1)
- Composition of public debt (illustrative trends shown):
  - By maturity: increasing share of medium and long-term issuance over time; short-term share declining.
  - By currency: large share local currency-denominated; foreign currency-denominated share shown separately.

### Stress Tests (selected results and assumptions)
- Stress tests considered: Primary Balance Shock; Real GDP Growth Shock; Real Interest Rate Shock; Real Exchange Rate Shock; Combined Shock.
- Example baseline and shock assumptions (selected):
  - Baseline real GDP growth path: 2020: -3.4; 2021: 3.6; 2022: 3.5; 2023–2025: 3.3, 3.3, 3.3.
  - Primary Balance Shock: primary balance path includes -1.8 in 2020 improving to 0.4 in 2021 and 1.6 in 2022.
  - Real Interest Rate Shock: effective interest rate rises to 5.25, 5.66, 6.26, 6.4 in projection years under shock (table shows progressive increases).
  - Real Exchange Rate Shock: example includes a one-time illustrative depreciation shock in other tests (see External DSA for 30 percent real depreciation scenario).
- Outcomes (illustrative):
  - Gross nominal public debt under various shocks is shown peaking higher than baseline in stress scenarios; public gross financing needs also increase under stress scenarios.
  - Additional stress-test charts display debt in percent of GDP, debt in percent of revenue, and public gross financing needs in percent of GDP across scenarios.

### External Debt Sustainability—Bound Tests and Framework (selected metrics)
- Historical and baseline external debt (in percent of GDP):
  - Historical (2015): 94
  - Baseline (2019): 68
- External debt projections and scenarios:
  - Baseline external debt-to-GDP declines from 69 (2018) to 68 (2019) and projected around mid-60s in subsequent years (detailed table shows: 2015–2025 series with baseline 65.1 in 2015, 66.3 in 2016, 69.6 in 2017, 69.0 in 2018, 68.8 in 2019, 76.7 in 2020, 76.3 in 2021, 74.5 in 2022, 74.7 in 2023, 71.7 in 2024, 68.1 in 2025).
- Gross external financing need (in billions of US dollars and percent of GDP):
  - Levels in billions of US dollars (selected): 2015: 6.2; 2016: 7.2; 2017: 6.9; 2018: 5.8; 2019: 4.2; 2020: 6.5; 2021: 6.2; 2022: 4.6; 2023: 5.7; 2024: 4.7; 2025: 4.7.
  - In percent of GDP: 2015: 16.3; 2016: 18.4; 2017: 16.9; 2018: 13.7; 2019: 9.5; 2020: 15.2; 2021: 13.7; 2022: 9.5; 2023: 11.3; 2024: 8.7; 2025: 8.2.
- External debt dynamics drivers (selected contributions, in percent of GDP):
  - Current account deficit, excluding interest payments:
    - 2015: 8.3
    - 2016: 8.8
    - 2017: 9.4
    - 2018: 5.1
    - 2019: 0.8
    - 2020: 3.9
    - 2021: 2.7
    - 2022: 2.1
    - 2023: 2.2
    - 2024: 1.7
    - 2025: 1.2
  - Deficit in balance of goods and services:
    - 2015: 22.8
    - 2016: 21.2
    - 2017: 21.5
    - 2018: 18.5
    - 2019: 13.1
    - 2020: 16.0
    - 2021: 12.7
    - 2022: 11.4
    - 2023: 10.4
    - 2024: 9.3
    - 2025: 8.2
  - Exports (in percent of GDP):
    - 2015: 37.2
    - 2016: 34.5
    - 2017: 35.1
    - 2018: 35.7
    - 2019: 37.2
    - 2020: 29.7
    - 2021: 33.2
    - 2022: 34.9
    - 2023: 35.6
    - 2024: 36.3
    - 2025: 37.0
  - Net non-debt creating capital inflows (negative values indicate inflows):
    - 2015: -4.2
    - 2016: -4.0
    - 2017: -5.0
    - 2018: -2.3
    - 2019: -2.0
    - 2020: -1.2
    - 2021: -1.9
    - 2022: -2.7
    - 2023: -3.5
    - 2024: -4.1
    - 2025: -4.2
- External debt ratios and stress scenarios:
  - External debt-to-exports ratio (in percent) shows volatility, with values including 174.7, 192.0, 198.1, 193.2, 184.9, 258.2, 229.7, 213.6, 209.7, 197.5, 184.0 across 2015–2025 as presented.
  - Scenario shock descriptions include:
    - Individual shocks are permanent one-half standard deviation shocks (bound tests).
    - Combined shock applies permanent 1/4 standard deviation shocks to real interest rate, growth rate, and current account balance.
    - One-time real depreciation of 30 percent occurs in 2020 in a specific scenario.

### Key Macro-Fiscal Assumptions Underlying Baseline (selected)
- Real GDP growth (in percent):
  - Historical averages and baseline path show variability; baseline includes 2020: -3.4; 2021: 3.6; 2022: 3.5; 2023–2025: 3.3, 3.3, 3.3.
- GDP deflator in US dollars (change in percent):
  - 2015–2019 historical entries and projection: examples include 2.5 (2015), 1.3 (2016), 1.7 (2017), 1.8 (2018), 1.7 (2019), and projected 1.2, 2.2, 2.5, 2.5, 2.5 (2021–2025).
- Nominal external interest rate (in percent):
  - Selected values: 2015: 1.5; 2016: 1.7; 2017: 2.1; 2018: 2.8; 2019: 3.1; projections around 2.9–3.0 thereafter.
- Growth of exports and imports (US dollar terms, in percent):
  - Growth of exports examples: -9.0, -4.1, 5.6, 5.5, 7.9, 1.2, 7.0, -21.9, 18.4, 11.3, 8.2, 7.9, 8.0 (series across years as presented).
  - Growth of imports examples: -8.8, -4.2, 5.5, -0.5, -3.8, -2.4, 7.7, -11.2, 6.5, 6.9, 5.2, 5.0, 5.0 (series across years as presented).
- Current account balance, excluding interest payments (in percent of GDP):
  - Historical and projected series include -8.3, -8.8, -9.4, -5.1, -0.8, -6.5, 3.6, -3.9, -2.7, -2.1, -2.2, -1.7, -1.2.

*Source: IMF staff.*

### Appendix I. Letter of Intent

### Appendix I. Letter of Intent

### Context and immediate impact of COVID-19
- As of May 12, there were 576 confirmed cases and 9 deaths.
- The outbreak has interrupted economic activity, disrupted global and regional supply chains, reduced travel and remittances, and decreased demand for exports.
- The budget is under pressure from revenue loss and the need to mobilize additional public resources for health and social protection.
- With rising global risk aversion, access to international markets at rates compatible with preserving debt sustainability has been significantly impaired.

### Macroeconomic outlook and financing request
- Output is projected to contract by a minimum 3.4 percent in 2020—down from a pre-pandemic projection of 2.1 percent growth—due to a dramatic decline in tourism-related sectors and severe disruptions to the rest of the economy.
- Balance of payments (BoP) will be strained by reductions in tourism receipts, exports, and weakening remittances, partially offset by lower import bills from lower oil prices.
- To face immediate budgetary and external financing gaps, Jordan requests emergency financing from the IMF under the Rapid Financing Instrument (RFI) in the amount of SDR 291.55 million, equivalent to 85 percent of quota.
- In a subsequent statement, the authorities note a requested RFI amount of SDR 292 million, equivalent to 85 percent of quota; the RFI drawing would cover about one quarter of the increased balance of payments financing need.

### Emergency fiscal and administrative measures taken
- Health and containment:
  - Stopped air passenger traffic and closed land borders.
  - Suspended movement across governorates and imposed mandatory quarantines and a curfew.
  - Suspended public and private sector operations except for critical sectors.
  - Established a fund to cover emergency medical outlays and exempted medical supplies from sales tax.
- Fiscal and household/business support:
  - Provided temporary cash-flow relief to companies and households.
  - Took measures to offset fiscal costs, including:
    - Temporarily decreasing salaries of cabinet members and senior officials and delaying wage increases of government employees, teachers, and military.
    - Suspending overtime bonuses and allowances for higher paid employees.
    - Suspending monthly fuel allowances, travel bonuses, and monthly transportation allowances.
    - Instituting a hiring freeze for new positions in all government entities and state-owned enterprises.
- Central Bank of Jordan (CBJ) actions:
  - Reduced policy rates by 150 basis points.
  - Injected liquidity into the system (1.8 percent of GDP).
  - Allowed rescheduling of loans, enhanced its refinancing program, and created a new program targeted to small businesses.
  - Directed banks to postpone the distribution of 2020 profits to create additional buffers.
  - Did not relax prudential regulations and accounting standards and intends to keep regulatory framework aligned with international standards.

### Governance, transparency, and safeguards commitments
- For funds received under the RFI, the authorities commit to:
  - Create specific budget lines to facilitate tracking and reporting the released funds and incurred expenditures.
  - Link the fund to the Treasury Single Account (TSA).
  - Publish on the government website procurement plans, notices and awarded contracts, including beneficial ownership of awarded entities, for the emergency responses.
  - Undertake ex-post audits of all crisis-mitigating inflows and spending by Jordan’s Audit Bureau and publish the results within 6 months from the end of the fiscal year.
- In line with IMF safeguards policy and the recently approved EFF, the Central Bank was submitted to a safeguards assessment; the authorities will provide IMF staff with the Central Bank’s most recently completed external audit reports and authorize external auditors to hold discussions with IMF staff.
- Since requested financing will be used for budget support, the authorities will update the existing memorandum of understanding between the Ministry of Finance and the Central Bank of Jordan on their respective responsibilities for servicing the related financial obligations to the IMF.
- The authorities authorize the IMF to publish this Letter of Intent and the staff report for the request for disbursement under the RFI.

### Medium-term plans and policy framework
- The authorities remain committed to the reforms included in the recently approved Extended Fund Facility (EFF) and understand program targets and policies will need to be reviewed and reassessed at the time of the first review.
- Once COVID-19 effects abate, they plan to:
  - Resume fiscal consolidation and accelerate structural reforms to rebuild buffers and support growth.
  - Roll back temporary economic support measures and restart fiscal consolidation as soon as immediate pressures abate.
  - Reprioritize expenditure towards demands created by COVID-19, with special focus on social safety nets.
  - Contain growth of the wage bill, streamline other current spending, postpone non-priority investment, and broaden the tax base by curtailing tax exemptions, reducing tax evasion, and addressing tax administration weaknesses.
- The authorities will not introduce restrictions on payments and transfers for international transactions, trade restrictions for BoP purposes, multiple currency practices, or enter into bilateral payment agreements inconsistent with Article VIII of the IMF’s Articles of Agreement.

### Statement by Jordan’s Executive Director representation (May 20, 2020)
- The authorities implemented a total lockdown that lasted two months; containment measures were effective at saving lives.
- As of May 20, 2020, the number of coronavirus cases totaled 613 with 408 recovered and 9 deaths.
- The containment measures have had a severe economic impact:
  - Growth projection for 2020 was reduced by 5 percentage points and could be further reduced, with a contraction in GDP now forecast for the year.
  - Tourism has come to a standstill, exports have plummeted, and remittance inflows are expected to be hit hard.
  - Jordan may not be able to tap international markets for a planned Eurobond issue.
- Spending on addressing the virus is being administered transparently and subject to good governance procedures.
- The authorities requested emergency financing under the RFI in the amount of SDR 292 million, equivalent to 85 percent of quota, noting higher access would not have been possible within the Fund’s normal access limits.
- The remainder of the balance of payments gap is expected to be covered by development partners and by targeting a smaller accumulation of reserves than under the EFF program.
- The authorities underscore that assistance to host refugees remains substantially below actual needs and commitments, a situation made more urgent by the pandemic; Jordan delivered food and other necessities to refugees and Jordanians to enable compliance with curfews.

*Appendix I. Letter of Intent, May 13, 2020.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1jorea2020002.pdf_