## 1jorea2023003

## Source details

**Canonical URL:** [1jorea2023003](https://www.imf.org/-/media/files/publications/cr/2023/english/1jorea2023003.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/cr/2023/english/1jorea2023003.pdf.md)
- [Structured JSON version](/-/media/files/publications/cr/2023/english/1jorea2023003.pdf.json)

---

### Executive summary — context and outlook
- GDP growth: "GDP grew by 2.5 percent in 2022."
- Inflation:
  - "Peaked at 5.4 percent in September 2022."
  - "Expected to end 2023 at 2.7 percent."
  - "Dropped to 2.9 percent in April 2023."
- External sector:
  - "Current account deficit widened to 8.8 percent of GDP in 2022."
  - "Projected to narrow in 2023 to 7.5 percent of GDP."
  - "Jordan successfully issued a 6-year US$1.25 billion bond at 7½ percent in April 2023."
- Reserves and peg:
  - "International reserves expected to remain at a comfortable level."
  - "Authorities and the Central Bank of Jordan (CBJ) remain committed to safeguarding the U.S. dollar peg."
- Labor market and social conditions:
  - "Unemployment rate: 21.9 percent by end-Q1 2023."
  - "Youth unemployment: close to 50 percent."
  - "Female unemployment: close to 30 percent."
  - "Removal of diesel and gasoline subsidies in December 2022 sparked large-scale strikes and protests, which have subsided."

### Program implementation, conditionality, and structural actions
- Program performance:
  - "All end-December 2022 performance criteria (PCs) were met."
  - "Most end-March 2023 indicative targets (ITs) were met; ITs on electricity and water distribution companies’ arrears were missed."
  - "6 out of 7 structural benchmarks (SBs) for the period through June 2023 were met."
- Selected structural measures and progress:
  - "E-invoicing: covered nearly 60 percent of all sales transactions by end-April (exceeding the target of one-third); aim to expand coverage to 90 percent of all sales transactions by end-2023."
  - "AI-based e-audit systems for tax returns: implemented (met June 2023 SB)."
  - "Track-and-trace measures for alcohol: significant progress; given technical challenges the SB is proposed to be reset for December 2023."
  - "Medium-term revenue administration roadmap and comprehensive tax expenditure analysis: being finalized with FAD assistance."
  - "Expenditure controls: annual purchase plan for wheat and barley; strengthened audits of the supply chain."
  - "Social assistance: National Aid Fund seeks to unify programs into a single program and improve targeting."
  - "Public investment management: establishing National Registry of Investment Projects (NRIP) to transition PIP/PIM appraisal processes onto a unified electronic platform."
  - "Public financial management: proposed Cabinet decision to establish an inter-ministerial committee to determine outstanding health and energy arrears (proposed SB for July 2023)."

### Fiscal stance, targets, and debt outlook
- 2022 fiscal outturn:
  - "Central government primary deficit (excluding grants and transfers to NEPCO and WAJ): JD 1233 million in 2022, or 3.7 percent of GDP (slightly below the targeted JD 1298 million)."
  - "Overall general government deficit widened due to a higher interest bill and a lower surplus of the social security fund."
- 2023 budget and adjustment commitment:
  - "Approved 2023 central government budget target: primary deficit (excluding grants and transfers to NEPCO and WAJ) of JD 1088 million (equivalent to 3.1 percent of GDP)."
  - "Authorities agreed to reduce the central government primary deficit to JD 1014 million (or 2.9 percent of GDP) during 2023; any further revenue overperformance will be used to retire debt."
- Medium-term consolidation and fiscal objectives:
  - "Authorities committed to reduce the public debt-to-GDP ratio to 80 percent by end-2028."
  - Planned measures:
    - "Additional revenue-raising measures equivalent to 1.5 percent of GDP by 2028."
    - "Efforts to reduce and improve efficiency of expenditures reaching 1 percent of GDP by 2028."
- December 2022 fiscal outturn vs. fifth review targets (JD millions):
  - "Total revenue and grants: 9,049 (target 8,914)."
  - "Domestic revenue: 8,234 (target 8,122)."
  - "Tax revenue: 6,228 (target 6,048)."
  - "Total expenditures: 10,986 (target 10,914)."
  - "Overall central government balance: -1,937 (target -2,000)."
  - "Primary balance (exc. grants, NEPCO and WAJ): -1,298 (target -1,233)."

### Monetary policy, reserves, and financial sector resilience
- Monetary policy actions:
  - "CBJ has raised its policy rates ten times since March 2022, in line with the U.S. Federal Reserve, and issued sizable certificates of deposit to mop up excess liquidity."
  - "Credit growth has started to slow reflecting higher interest rates."
- Reserve targets and request:
  - "End-December 2022 and end-March 2023 CBJ targets for net international reserves (NIR) and net domestic assets (NDA) were met by comfortable margins."
  - "The CBJ requests a downward modification by about US$ 0.5 billion of the end-2023 NIR performance criterion to allow a cushion to support the peg in case of unexpected shocks."
  - "If shocks materialize, reserve coverage would be expected to decline marginally and remain close to 100 percent of the ARA metric."
- Financial sector soundness (selected indicators, year series):
  - "Risk-weighted capital adequacy ratio: 2019 18.3; 2020 18.3; 2021 18.0; 2022 17.3."
  - "NPLs (In percent of total loans): 2019 5.0; 2020 5.5; 2021 5.0; 2022 4.5."
  - "Provisions (In percent of classified loans): 2019 69.5; 2020 71.5; 2021 79.9; 2022 81.5."
  - "Liquidity ratio: 2019 134.1; 2020 136.5; 2021 141.5; 2022 138."
  - "Return on assets: 2019 1.2; 2020 0.6; 2021 1.0; 2022 1.0."

### Key risks and near-term outlook
- Growth and inflation forecasts:
  - "Growth expected to be around 2.6 percent in 2023."
  - "Medium-term growth projected to increase to 3 percent annually."
- External and global risks:
  - "Elevated global headwinds: continued U.S. Federal Reserve tightening, possible further tightening of global financial conditions, and weaker global growth."
  - "Geopolitical tensions and fragmentation could spur commodity price surges or disrupt trade and investment."
  - "Climate-change risks, particularly worsening water scarcity, could hurt growth and government finances."
- Social risks:
  - "High unemployment and higher cost-of-living could pose social and political tensions."

### Policy priorities and recommendations (summary)
- Fiscal policy:
  - "Continue gradual fiscal consolidation while protecting social and capital spending."
  - "Broaden the tax base, improve tax compliance, contain spending while increasing efficiency, and improve targeting of social assistance."
- Structural and sectoral reforms:
  - "Advance and accelerate structural reforms to create a more dynamic private sector to generate jobs."
  - "Improve financial viability and efficiency of electricity and water sectors."
  - "Expand e-invoicing to 90 percent of sales transactions by end-2023; implement medium-term revenue administration roadmap; complete tax expenditure analysis."
  - "Implement Public Sector Modernization Roadmap and determine and clear certified health and energy arrears."
- Monetary and financial stability:
  - "Preserve monetary stability and maintain adequate reserve buffers to safeguard the peg."
  - "CBJ should continue to gradually unwind subsidized lending schemes and monitor banks’ asset quality; ensure prudent accounting and provisioning in line with IFRS9."
- AML/CFT:
  - "Continue implementing FATF AML/CFT recommendations with the aim of de-listing later this year."

### NEPCO and electricity sector — finances, measures, and targets
- Operational losses and projections:
  - "2022 operational loss was estimated at 0.7 percent of GDP."
  - "Losses expected to increase to 1.1 percent of GDP in 2023."
  - "Losses projected to gradually decline to 0.6 percent of GDP over the medium term."
- Action plan and quantified impacts:
  - "Measures adopted aimed to generate a JD 90 million financial improvement in 2023."
  - "Revenue measures expected to generate JD 50 million (0.15 percent of GDP) in revenues for NEPCO in 2023 (met SB for May 2023)."
  - "Cost measures expected to generate JD 13 million in savings in 2023."
- Fiscal loss targets and commitments:
  - "Ensure that NEPCO’s operational losses will not exceed 1 percent of GDP in 2024 and are gradually reduced to close to ½ percent of GDP over the medium term."
  - "NEPCO plans to repay all arrears to other energy companies by end-September 2023."
  - "Commitment to settle cross arrears between SAMRA, NEPCO, and the government by end-2023."
- Planned reforms with dates:
  - "Hire a reputable consultant to conduct a comprehensive review of the electricity system (proposed SB for November 2023)."
  - "Secure a telecom license for NEPCO by December 2023; replace the FSRU with cheaper substitutes by 2025; establish an LNG purchasing company by 2026."

### Water sector — financial sustainability roadmap (FSR) and targets
- Current losses and targets:
  - "2022 operational losses for the water sector estimated at 0.8 percent of GDP; losses expected to remain broadly unchanged in 2023."
  - "FSR commitments: reach full cost recovery of water and wastewater services’ O&M by 2030; reach full cost recovery of both O&M and capital cost of the NCP by 2040."
- Non-revenue water (NRW) targets and progress:
  - "Reduce NRW by 2–3 percentage points per year to 25 percent of total water supplied by 2040."
  - "Progress: NRW reduced by 2.3 percentage points since mid-2022, to 50 percent of water supplied."
- Arrears and governance:
  - "Current water sector arrears stand at JD 80 million."
  - "Cabinet decision in February 2023 to form a joint committee between the Ministries of Finance and Water and Irrigation (met SB for March 2023) to clear all arrears accumulated by the water sector by end-2024."

### Structural reforms to support employment, investment, and governance
- Business environment and competition:
  - "Amendments to the Competition Law enacted to curb dominant firms."
  - "Progress in reducing licensing requirements in the tourism sector (SB for December 2023)."
  - "Actions to address transportation bottlenecks and trade facilitation, including National Single Window upgrades."
- Labor market and social protection:
  - "Amended Labor Law enhances protections for women; female labor force participation rate was 13.7 percent in the first quarter of 2023."
  - "Amended Social Security Law lowered contribution rates for new workers under the age of 30."
  - "National Employment Scheme: around 55,703 applicants since launch; over 21,000 new hires as of April 30, 2023 (almost half female and over 1,600 NAF beneficiaries)."
- Data provisioning and transparency:
  - "Government will establish MoUs to allow the Department of Statistics regular and timely access to MOF, ISTD, CCD, and CBJ data (proposed SB for September 2023)."

### External financing, reserves, and program financing
- Staff baseline and financing assumptions:
  - "Roll-over of GCC deposits of $833 million to 2024."
  - "Additional financing under the seven-year MoU signed last year with the U.S."
  - "New World Bank programs."
  - "Revised baseline includes issuance of a US$1.25 billion Eurobond."
- Reserves and capacity to repay:
  - "Reserves expected to remain above 90 percent of ARA in 2023–24."
  - "Jordan’s capacity to repay the Fund remains adequate; indicators of Fund credit remain below peak values under past Fund-supported programs."
  - "Debt remains sustainable though debt sustainability risks remain."
- Requests supported by staff:
  - "Completion of the sixth review under the extended arrangement and modification of targets."
  - "Modification of the end-December 2023 PC on the central government primary deficit (excluding grants and transfers to NEPCO and WAJ), lowering it."
  - "Modification of the end-December 2023 PC on the CBJ’s NIR, lowering it."

### Program monitoring, quantitative targets, and data requirements (selected)
- Major monitored program variables and sample targets/projections:
  - Real GDP (Proj.): "2023 2.7; 2024 2.7; 2025 3.0; 2026 3.0; 2027 3.0; 2028 3.0."
  - Consumer price inflation (annual average): "Proj. 2023 2.9; 2024 2.6; 2025 2.5; 2026 2.5; 2027 2.5; 2028 2.5."
  - Overall central government balance (percent of GDP): "Proj. 2023 -4.7; 2024 -5.0; 2025 -4.7; 2026 -3.9; 2027 -3.0; 2028 -2.8."
  - Government and guaranteed gross debt (percent of GDP): "Proj. 2023 112.0; 2024 114.1; 2025 113.7; 2026 112.4; 2027 110.4; 2028 108.7."
  - Net international reserves (USD millions): "Proj. 2023 14,498; 2024 14,065; 2025 15,054; 2026 16,551; 2027 17,644; 2028 18,888."
- Program monitoring and data provision obligations:
  - Semi-annual PCs and ITs; quarterly IT reporting; extensive monthly, quarterly, and weekly data submissions as specified (timelines: weekly data within one week; monthly/quarterly within six to eight weeks; national accounts and BOP within three months).
  - Detailed reporting requirements for NEPCO, WAJ, and water distribution companies (quarterly unaudited income statements, payables, arrears breakdowns).
  - CBJ reporting on foreign exchange reserves, FX interventions, CD auctions, monetary statistics, and outstanding bilateral accounts with the Central Bank of Iraq.

*Source: IMF staff EXECUTIVE SUMMARY and IMF staff report content provided in the supplied extract (1jorea2023003).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context and outlook
- Despite a challenging global environment, Jordan’s economy continues to grow at a moderate pace; GDP grew by 2.5 percent in 2022.
- Inflation:
  - Peaked at 5.4 percent in September 2022.
  - Expected to end 2023 at 2.7 percent.
  - Dropped to 2.9 percent in April 2023.
- External sector:
  - Current account deficit widened to 8.8 percent of GDP in 2022.
  - Projected to narrow in 2023 to 7.5 percent of GDP (considerably less narrowing than expected at the time of the fifth review).
  - Jordan successfully issued a 6-year US$1.25 billion bond at 7½ percent in April 2023.
- Reserves and peg:
  - International reserves expected to remain at a comfortable level.
  - The authorities and the Central Bank of Jordan (CBJ) remain committed to safeguarding the U.S. dollar peg.
- Labor market and social conditions:
  - Unemployment rate: 21.9 percent by end-Q1 2023.
  - Youth unemployment: close to 50 percent.
  - Female unemployment: close to 30 percent.
  - Removal of diesel and gasoline subsidies in December 2022 sparked large-scale strikes and protests, which have subsided.

### Program implementation and structural actions
- Program status:
  - All end-December 2022 performance criteria (PCs) were met.
  - Most end-March 2023 indicative targets (ITs) were met; ITs on electricity and water distribution companies’ arrears were missed.
  - 6 out of 7 structural benchmarks (SBs) for the period through June 2023 were met. The remaining SB relates to technical solutions for introducing track-and-trace procedures for alcohol.
- FATF AML/CFT implementation: Solid progress toward Jordan’s de-listing later this year.
- Key fiscal and structural measures underway:
  - E-invoicing: covered nearly 60 percent of all sales transactions by end-April (exceeding the target of one-third); aim to expand coverage to 90 percent of all sales transactions by end-2023.
  - AI-based e-audit systems for tax returns: implemented (met June 2023 SB).
  - Track-and-trace measures for alcohol: significant progress; given technical challenges the SB is proposed to be reset for December 2023.
  - Medium-term revenue administration roadmap and comprehensive tax expenditure analysis: being finalized with FAD assistance.
  - Expenditure controls: annual purchase plan for wheat and barley; strengthened audits of the supply chain.
  - Social assistance: National Aid Fund seeks to unify programs into a single program and improve targeting.
  - Public investment management: establishing National Registry of Investment Projects (NRIP) to transition PIP/PIM appraisal processes onto a unified electronic platform.
  - Public financial management: proposed Cabinet decision to establish an inter-ministerial committee to determine outstanding health and energy arrears (proposed SB for July 2023); direct payment of budget units’ bills to NEPCO initiated to stem new energy arrears.

### Fiscal stance, targets, and debt outlook
- 2022 fiscal outturn:
  - Central government primary deficit (excluding grants and transfers to NEPCO and WAJ): JD 1233 million in 2022, or 3.7 percent of GDP (slightly below the targeted JD 1298 million).
  - Overall general government deficit widened due to a higher interest bill and a lower surplus of the social security fund.
- 2023 budget and adjustments:
  - Approved 2023 central government budget target: primary deficit (excluding grants and transfers to NEPCO and WAJ) of JD 1088 million (equivalent to 3.1 percent of GDP).
  - Authorities agreed to reduce the central government primary deficit to JD 1014 million (or 2.9 percent of GDP) during 2023 to keep consolidation on track; any further revenue overperformance will be used to retire debt.
- Medium-term consolidation:
  - Authorities committed to reduce the public debt-to-GDP ratio to 80 percent by end-2028.
  - Planned measures to achieve this:
    - Additional revenue-raising measures equivalent to 1.5 percent of GDP by 2028.
    - Efforts to reduce and improve efficiency of expenditures reaching 1 percent of GDP by 2028.
- December 2022 fiscal outturn vs. fifth review targets (in millions of Jordanian dinars):
  - Total revenue and grants: 9,049 (target 8,914).
  - Domestic revenue: 8,234 (target 8,122).
  - Tax revenue: 6,228 (target 6,048).
  - Total expenditures: 10,986 (target 10,914).
  - Overall central government balance: -1,937 (target -2,000).
  - Primary balance (exc. grants, NEPCO and WAJ): -1,298 (target -1,233).

### Monetary policy, reserves, and financial sector resilience
- Monetary policy actions:
  - CBJ has raised its policy rates ten times since March 2022, in line with the U.S. Federal Reserve, and issued sizable certificates of deposit to mop up excess liquidity.
  - Credit growth has started to slow reflecting higher interest rates.
- Reserve targets and request:
  - End-December 2022 and end-March 2023 CBJ targets for net international reserves (NIR) and net domestic assets (NDA) were met by comfortable margins.
  - The CBJ requests a downward modification by about US$ 0.5 billion of the end-2023 NIR performance criterion to allow a cushion to support the peg in case of unexpected shocks, while maintaining adequate reserve coverage.
  - If shocks materialize, reserve coverage would be expected to decline marginally and remain close to 100 percent of the ARA metric.
- Exchange rate peg: The peg to the U.S. dollar, backed by adequate international reserves, continues to serve as an effective anchor and has contributed to relatively low inflation.

### Key risks and near-term outlook
- Growth and inflation forecasts:
  - Growth expected to be around 2.6 percent in 2023.
  - Medium-term growth projected to increase to 3 percent annually, supported by reforms in the MEFP.
- External and global risks:
  - Elevated global headwinds: continued U.S. Federal Reserve tightening, possible further tightening of global financial conditions, and weaker global growth could affect Jordan’s external and fiscal accounts.
  - Geopolitical tensions and fragmentation could spur commodity price surges or disrupt trade and investment, adding pressure to external and fiscal accounts and social tensions.
  - Climate-change risks, particularly worsening water scarcity, could hurt growth and government finances.
  - Upside potential: regional political rapprochement may catalyze trade and investment.
- Social risks: High unemployment and higher cost-of-living could pose social and political tensions.

### Policy priorities and recommendations (summarized)
- Continue gradual fiscal consolidation while protecting social and capital spending.
- Advance and accelerate structural reforms to:
  - Create a more dynamic private sector to generate jobs.
  - Improve financial viability and efficiency of electricity and water sectors to reduce fiscal drains and ensure delivery of essential services under climate stress.
  - Strengthen tax policy and administration (expand e-invoicing to 90 percent of sales transactions by end-2023; implement medium-term revenue administration roadmap; complete tax expenditure analysis).
  - Improve expenditure efficiency (annual purchase plans for strategic food imports; unify and better target social assistance).
  - Enhance public financial management (determine and clear certified health and energy arrears; implement Public Sector Modernization Roadmap).
- Preserve monetary stability and maintain adequate reserve buffers to safeguard the peg.
- Continue implementing FATF AML/CFT recommendations with the aim of de-listing later this year.

*Source: IMF staff EXECUTIVE SUMMARY (1jorea2023003).*

### 10. The CBJ is gradually scaling back its subsidized lending schemes (MEFP¶13). As an

### 1jorea2023003 - 10. The CBJ is gradually scaling back its subsidized lending schemes (MEFP¶13). As an

### Monetary policy and subsidized lending
- The CBJ is gradually scaling back its subsidized lending schemes.
- The scheme created in April 2020 to help SMEs, amounting to JD 700 million, expired at end-April 2023.
- The other scheme, totaling JD 1.4 billion and introduced in 2011 to support vital economic sectors, will be gradually raised toward the policy rate, starting in early 2024, and should ultimately be phased out.
- Recommendation: The CBJ should continue to gradually unwind its subsidized lending (paragraphs referenced: MEFP¶13; Staff appraisal paragraph 26).

### Banking system soundness and supervision
- The banking system remains healthy (MEFP¶14–15).
- Risk-weighted capital adequacy ratio: 2019 18.3; 2020 18.3; 2021 18.0; 2022 17.3.
- NPLs (In percent of total loans): 2019 5.0; 2020 5.5; 2021 5.0; 2022 4.5.
- Provisions (In percent of classified loans): 2019 69.5; 2020 71.5; 2021 79.9; 2022 81.5.
- Liquidity ratio: 2019 134.1; 2020 136.5; 2021 141.5; 2022 138.
- Return on assets: 2019 1.2; 2020 0.6; 2021 1.0; 2022 1.0.
- Loans to deposits ratio: 2019 81.6; 2020 84.5; 2021 82.8; 2022 83.5.
- Observations:
  - Capital adequacy fell slightly during 2022 but remains well above the regulatory minimum of 12 percent.
  - NPLs decreased, albeit mainly due to credit expansion.
  - Provisioning increased slightly.
- Recommendation: The CBJ should continue close monitoring of banks’ asset quality, ensuring sustained application of prudent accounting, reporting, and provisioning standards in line with IFRS9.

### Financial System Sustainability Assessment (FSSA) implementation
- The joint IMF-World Bank FSSA was completed in March 2023 (MEFP¶16).
- Key recommendations the authorities plan to implement in the next few years include:
  - (i) Further strengthening banking supervision by making it more risk-based and forward-looking, including developing pillar 2 supervisory assessments for more risk-sensitive capital requirements.
  - (ii) Enhancing systemic risk analysis by filling data gaps to enable stress tests on a globally consolidated basis, running systemic foreign currency liquidity analyses, and performing more granular analyses of household and corporate sector vulnerabilities.
  - (iii) Improving the crisis management and bank resolution framework.
- Institutional actions:
  - Authorities will establish a crisis management committee (based on an MoU) that comprises the CBJ, MoF, and JODIC to monitor banking sector developments and operationalize the crisis management framework (proposed SB for December 2023).
  - The CBJ developed a risk-based capital and solvency regime for the insurance sector (met SB for June 2023) after the sector came under the CBJ’s purview in 2021.

### AML/CFT progress
- The authorities have been making steady progress strengthening the AML/CFT regime (MEFP¶18).
- Many items of the action plan to comply with FATF recommendations have been implemented; remaining items expected to be completed by the Fall of 2023.
- Full implementation will enable Jordan to exit the FATF watch list, helping preserve correspondent banking relationships and guard against financial integrity risks.

### Electricity sector: NEPCO financial outlook and reforms
- NEPCO managed to contain operational losses in 2022, broadly in line with expectations.
- 2022 operational loss was estimated at 0.7 percent of GDP.
- Losses expected to increase to 1.1 percent of GDP in 2023 (somewhat higher than the 1.0 percent of GDP expected at the time of the fifth review).
- Losses are projected to gradually decline to 0.6 percent of GDP over the medium term, reflecting revenue and cost saving measures partly offset by a shift from cheaper imported natural gas to more expensive oil shale.
- NEPCO’s arrears to other energy companies have continued to exceed targets.
- Measures adopted (action plan of December 2022) aimed to generate a JD 90 million financial improvement in 2023, supported by the World Bank Electricity Sector Efficiency and Reliability Program:
  - Revenue measures expected to generate JD 50 million (0.15 percent of GDP) in revenues for NEPCO in 2023 (met SB for May 2023):
    - Extending a connection fee for self-generation to businesses.
    - Transferring royalties from oil shale PPAs to NEPCO.
    - Setting targets for distribution companies on electricity losses and O&M expenses, allowing an increase in NEPCO’s bulk tariffs.
    - Introducing time-of-use tariffs.
    - Conducting a review of recipients of subsidies to exclude ineligible households.
  - Cost measures expected to generate JD 13 million in savings in 2023:
    - Higher gas transit volumes reducing gas transportation costs.
    - Minor savings from switching generation to more efficient power plants.
- Additional actions:
  - Authorities will hire a reputable consultant to conduct a comprehensive review of the electricity system (generation, transmission, distribution) and propose actions to achieve NEPCO’s financial sustainability (proposed SB for November 2023).
  - Policy focus: lowering the cost of generation and financing, and increasing efficiency, given tariffs relative to neighbors and the cost of new self-generation.

### Water sector: financial sustainability roadmap (FSR) and targets
- 2022 operational losses for the water sector estimated at 0.8 percent of GDP; losses expected to remain broadly unchanged in 2023.
- Cabinet decision in February 2023 to form a joint committee between the Ministries of Finance and Water and Irrigation (met SB for March 2023) to meet quarterly and help ensure clearance of all arrears accumulated by the water sector by end-2024.
- WAJ’s arrears remained within targets; water distribution companies’ arrears did not.
- FSR commitments:
  - Gradually reach full cost recovery of water and wastewater services’ O&M (including of the National Conveyor Project (NCP)) by 2030.
  - Reach full cost recovery of both O&M and capital cost of the NCP by 2040.
  - Reduce non-revenue water (NRW) by 2–3 percentage points per year to 25 percent of total water supplied by 2040.
- Progress: NRW reduced by 2.3 percentage points since mid-2022, to 50 percent of water supplied.
- Note: Reducing NRW will require significant investment in the network.

### Climate change and financing needs
- Climate change will aggravate Jordan’s water shortage, creating pressing and substantial financing needs for adaptation.
- Authorities have developed a National Climate Change Policy and National Adaptation Plan and seek a mix of public and private financing, including donor financing.
- Authorities have expressed interest in accessing support under the Resilience and Sustainability Trust (RST).
- A Country Climate and Development Report prepared by the World Bank was published in September 2022.

### Structural reforms to support employment, investment, and governance
- Structural reforms should continue and be accelerated to attract investment, boost productivity and competitiveness, and create job-rich growth in line with the Economic Modernization Vision (MEFP ¶27–29).
- Key reform areas and actions:
  - Business environment:
    - Amendments to the Competition Law enacted to curb dominant firms by sharpening the definition for market concentration and increasing penalties for violations.
    - Progress in reducing licensing requirements in the tourism sector, including planning to submit related legislation (SB for December 2023).
    - Actions to address transportation bottlenecks.
  - Labor market and social protection:
    - Amendments to the Labor Law and Social Security Law adopted:
      - Amended Labor Law enhances protections for women from harassment and violence, removes restrictions on female employment in certain professions and industries, and on permitted hours of work.
      - Government will issue additional instructions to expand protections for pregnant women and persons with disabilities (proposed SB for December 2023).
      - Female labor force participation rate was 13.7 percent in the first quarter of 2023.
      - Amended Social Security Law lowered contribution rates for new workers under the age of 30 to help tackle youth unemployment.
    - Government repealed all Defense Orders introduced at the start of the pandemic, including those prohibiting employers from terminating worker contracts.
  - Data provisioning and transparency:
    - Government will establish MoUs to allow the Department of Statistics regular and timely access to the latest legally permissible government data sources (Ministry of Finance, Income and Sales Tax Department, Companies Control Department) and CBJ data (proposed SB for September 2023).

### Program financing, reserves, and safeguards
- Program remains fully financed despite an uncertain external environment.
- Reserves expected to remain above 90 percent of ARA in 2023–24, as projected in the fifth review.
- Staff’s baseline includes:
  - Roll-over of GCC deposits of $833 million to 2024.
  - Additional financing under the seven-year MoU signed last year with the U.S.
  - New World Bank programs.
- The revised baseline includes the recent issuance of a US$1.25 billion Eurobond.
- Jordan’s capacity to repay the Fund remains adequate; indicators of Fund credit remain below peak values under past Fund-supported programs.
- Debt remains sustainable though debt sustainability risks remain.
- Staff will commence discussions on a possible successor arrangement, as requested by the authorities.
- Safeguards assessment: The CBJ implemented almost all of the 2020 safeguards recommendations, with enhancement of disclosures in the CBJ’s financial statements still pending.

### Staff appraisal and policy guidance
- The authorities have navigated external shocks and maintained macroeconomic stability through prudent fiscal and monetary policies.
- Economy projected to grow in 2023 at 2.6 percent.
- Job creation remains weak and unemployment remains too high.
- Program performance: All PCs and most ITs have been met; delivery of structural conditionality robust; authorities met six out of seven SBs through June 2023.
- Fiscal policy guidance:
  - Continue gradual consolidation to place public debt on a downward path.
  - Government on track to achieve a central government primary deficit (excluding grants and transfers to NEPCO and WAJ) of 2.9 percent in 2023.
  - Authorities committed to bring the debt-to-GDP ratio below 80 percent by 2028.
  - Achieving this requires broadening the tax base, improving tax compliance, containing spending while increasing efficiency, improving targeting of social assistance, and enhancing civil service productivity.
- Monetary policy guidance:
  - Remain focused on safeguarding the peg and financial stability.
  - CBJ must continue to adjust policy rates as needed to ensure the peg is credible and reserve buffers adequate.
  - CBJ should continue to closely monitor banks’ asset quality and further strengthen financial sector oversight in line with FSSA recommendations.
- Sectoral reform guidance:
  - Implementation of electricity and water sector reforms is critical for public sector sustainability and reliable supply.
  - Decisive actions needed to lower costs and improve efficiency in the electricity sector and to implement the water sector financial sustainability roadmap.
- Structural reform guidance:
  - Accelerate reforms to improve the business environment, strengthen competition, reduce bureaucracy, increase labor market flexibility and female labor participation, and enhance governance and transparency to achieve the Economic Modernization Vision.

*Source: IMF staff report content provided in the supplied extract.*

### 29. Staff supports the authorities’ request for the completion of the sixth review under the

### 29. Staff supports the authorities’ request for the completion of the sixth review under the extended arrangement and modification of targets

### Review and modification requests
- Staff supports the authorities’ request for the completion of the sixth review under the extended arrangement and modification of targets.
- Staff supports the authorities’ request for a modification of the end-December 2023 PC on the central government primary deficit (excluding grants and transfers to NEPCO and WAJ), lowering it to ensure that overall fiscal consolidation remains on track.
- Staff supports the authorities’ request for a modification of the end-December 2023 PC on the CBJ’s NIR, lowering it to provide some headroom considering the uncertain external outlook.
- Stronger and timely development partner support is needed to continue to help Jordan cope with the global economic headwinds, address the challenges posed by climate change, and shoulder the burden of hosting a large number of refugees.
- Staff welcomes the authorities’ climate adaptation efforts and will proceed with the preparations for a possible successor arrangement that could be combined with support under the RST.

### Real sector and labor developments
- Most sectors have surpassed their pre-pandemic levels; GDP growth has been mainly driven by the manufacturing and financial services sectors.
- Inflation has decelerated, but had been driven by high energy prices.
- Youth unemployment rate stays high and female participation remains low.
- Overall employment recovery has been heterogeneous across sectors.
- Selected indicators and levels:
  - Real GDP at market prices: 2.2 (Act. 2021), 2.7 (2022), 2.5 (5th Rev 2022), 2.7 (Act. 2022), 2.6 (5th Rev 2023), 2.7 (Proj. 2023), 2.7 (Proj. 2024), 3.0 (Proj. 2025), 3.0 (Proj. 2026), 3.0 (Proj. 2027), 3.0 (Proj. 2028).
  - Consumer price inflation (annual average): 1.3 (Act. 2021), 4.4 (2022), 4.2 (5th Rev 2022), 3.8 (Act. 2022), 2.7 (5th Rev 2023), 2.9 (Proj. 2023), 2.6 (2024), 2.5 (2025), 2.5 (2026), 2.5 (2027), 2.5 (2028).

### Fiscal policy, balances, and debt
- Revenue and expenditure dynamics:
  - Revenue and grants: 25.4 (Act. 2021), 26.1 (2022), 26.5 (5th Rev 2022), 25.8 (Act. 2022), 26.9 (5th Rev 2023), 25.9 (Proj. 2023), 26.4 (Proj. 2024), 26.3 (Proj. 2025), 26.7 (Proj. 2026), 26.7 (Proj. 2027), 26.8 (Proj. 2028) (percent of GDP).
  - Expenditure (including other use of cash): 31.8 (Act. 2021), 31.7 (2022), 32.4 (5th Rev 2022), 31.0 (Act. 2022), 32.0 (5th Rev 2023), 30.6 (Proj. 2023), 31.4 (Proj. 2024), 31.0 (Proj. 2025), 30.7 (Proj. 2026), 30.4 (Proj. 2027), 30.3 (Proj. 2028) (percent of GDP).
- Key balance outcomes:
  - Overall central government balance: -6.4 (Act. 2021), -5.6 (2022), -5.9 (5th Rev 2022), -5.2 (Act. 2022), -5.1 (5th Rev 2023), -4.7 (Proj. 2023), -5.0 (Proj. 2024), -4.7 (Proj. 2025), -3.9 (Proj. 2026), -3.0 (Proj. 2027), -2.8 (Proj. 2028) (percent of GDP).
  - Overall central government balance excluding grants: -8.9 (Act. 2021), -7.9 (2022), -8.3 (5th Rev 2022), -7.3 (Act. 2022), -7.4 (5th Rev 2023), -6.5 (Proj. 2023), -6.9 (Proj. 2024), -6.2 (Proj. 2025), -5.3 (Proj. 2026), -4.3 (Proj. 2027), -4.1 (Proj. 2028).
  - Primary government balance (excluding grants): -4.5 (Act. 2021), -3.7 (2022), -3.7 (5th Rev 2022), -2.9 (Act. 2022), -2.9 (5th Rev 2023), -1.7 (Proj. 2023), -2.0 (Proj. 2024), -1.1 (Proj. 2025), -0.2 (Proj. 2026), 0.6 (Proj. 2027), 0.5 (Proj. 2028).
- Public debt trajectory:
  - Government and guaranteed gross debt: 111.7 (Act. 2021), 113.1 (2022), 114.1 (5th Rev 2022), 112.6 (Act. 2022), 113.8 (5th Rev 2023), 112.0 (Proj. 2023), 114.1 (Proj. 2024), 113.7 (Proj. 2025), 112.4 (Proj. 2026), 110.4 (Proj. 2027), 108.7 (Proj. 2028) (percent of GDP).
  - Government and guaranteed gross debt, net of SSC's holdings: 89.8 (Act. 2021), 89.7 (2022), 91.0 (5th Rev 2022), 88.2 (Act. 2022), 90.6 (5th Rev 2023), 86.2 (Proj. 2023), 89.3 (Proj. 2024), 87.5 (Proj. 2025), 85.0 (Proj. 2026), 81.9 (Proj. 2027), 79.8 (Proj. 2028).
- Fiscal composition highlights (2022 actual and projections):
  - Total revenue and grants (JD millions): 8,128 (Act. 2021), 9,049 (Act. 2022), 8,914 (5th Rev 2022), 9,524 (Act. 2022), 9,525 (5th Rev 2023), 10,087 (Proj. 2023), 9,858 (2024), 10,367 (2025), 11,116 (2026), 11,733 (2027), 12,410 (2028).
  - Domestic revenue (JD millions): 7,325 (Act. 2021), 8,234 (Act. 2022), 8,122 (5th Rev 2022), 8,744 (Act. 2022), 8,710 (5th Rev 2023), 9,391 (Proj. 2023), 9,126 (2024), 9,791 (2025), 10,551 (2026), 11,150 (2027), 11,795 (2028).
  - Tax revenue (JD millions): 5,627 (Act. 2021), 6,228 (Act. 2022), 6,048 (5th Rev 2022), 6,602 (Act. 2022), 6,574 (5th Rev 2023), 7,108 (Proj. 2023), 7,009 (2024), 7,537 (2025), 8,147 (2026), 8,579 (2027), 9,082 (2028).
  - Interest payments (JD millions): 1,403 (Act. 2021), 1,454 (Act. 2022), 1,477 (5th Rev 2022), 1,616 (Act. 2022), 1,622 (5th Rev 2023), 1,851 (Proj. 2023), 1,852 (2024), 1,990 (2025), 2,105 (2026), 2,147 (2027), 2,136 (2028).

### External sector and reserves
- External pressures and trade:
  - Current account balance (including grants): -8.2 (Act. 2021), -7.8 (2022), -8.8 (5th Rev 2022), -5.7 (Act. 2022), -7.5 (5th Rev 2023), -4.7 (Proj. 2023), -5.4 (Proj. 2024), -4.0 (Proj. 2025), -2.9 (Proj. 2026), -3.2 (Proj. 2027), -3.5 (Proj. 2028) (percent of GDP).
  - Current account balance (excluding grants): -12.0 (Act. 2021), -10.8 (2022), -12.7 (5th Rev 2022), -8.8 (Act. 2022), -10.8 (5th Rev 2023), -7.3 (Proj. 2023), -8.2 (Proj. 2024), -6.3 (Proj. 2025), -5.2 (Proj. 2026), -4.7 (Proj. 2027), -5.0 (Proj. 2028).
  - Exports of goods, f.o.b. ($ billions): 9.4 (Act. 2021), 12.0 (2022), 12.4 (5th Rev 2022), 12.2 (Act. 2022), 12.6 (5th Rev 2023), 11.5 (Proj. 2023), 12.1 (Proj. 2024), 12.6 (Proj. 2025), 13.3 (Proj. 2026), 13.8 (Proj. 2027), 14.3 (Proj. 2028).
  - Imports of goods, f.o.b. ($ billions): 19.2 (Act. 2021), 23.9 (2022), 24.3 (5th Rev 2022), 22.9 (Act. 2022), 22.9 (5th Rev 2023), 22.4 (Proj. 2023), 22.0 (Proj. 2024), 22.4 (Proj. 2025), 23.4 (Proj. 2026), 24.6 (Proj. 2027), 26.4 (Proj. 2028).
  - Oil and oil products ($ billions): 3.0 (Act. 2021), 4.4 (2022), 4.4 (5th Rev 2022), 3.9 (Act. 2022), 3.5 (5th Rev 2023), 3.8 (Proj. 2023), 3.4 (Proj. 2024), 3.4 (Proj. 2025), 3.4 (Proj. 2026), 3.4 (Proj. 2027), 3.5 (Proj. 2028).
- Reserves and international liquidity:
  - Gross usable international reserves ($ millions): 17,272 (Act. 2021), 16,061 (2022), 16,432 (5th Rev 2022), 16,561 (Act. 2022), 16,687 (5th Rev 2023), 16,458 (Proj. 2023), 15,998 (Proj. 2024), 16,808 (Proj. 2025), 18,138 (Proj. 2026), 19,029 (Proj. 2027), 20,046 (Proj. 2028).
  - Gross usable reserves in months of prospective imports: 6.9 (Act. 2021), 6.7 (2022), 6.9 (5th Rev 2022), 7.0 (Act. 2022), 7.2 (5th Rev 2023), 6.8 (Proj. 2023), 6.8 (Proj. 2024), 6.8 (Proj. 2025), 6.8 (Proj. 2026), 7.0 (Proj. 2027), 6.8 (Proj. 2028).
  - Net international reserves ($ millions): 15,646 (Act. 2021), 13,927 (2022), 14,381 (5th Rev 2022), 14,465 (Act. 2022), 14,645 (5th Rev 2023), 14,498 (Proj. 2023), 14,065 (Proj. 2024), 15,054 (Proj. 2025), 16,551 (Proj. 2026), 17,644 (Proj. 2027), 18,888 (Proj. 2028).

### Monetary and financial indicators
- Monetary policy and rates:
  - Policy rates rose ten times since March 2022 in line with the Fed.
  - Interest rate indicators (percent): Re-discount Rate, Overnight Deposit, Main Policy Rate (one-week repo), Federal Funds Rate, Interbank rate, Overnight Repo shown across 2013–2023.
- Bank liquidity and credit:
  - Banks’ JD liquidity (Billions) trends show excess reserves deposited at CBJ, deposits at CBJ's overnight facility, CDs issued by CBJ, and total JD liquidity across Jan-20 to Mar-23 series.
  - Private sector credit growth (y-o-y): 4.9 (Act. 2021), 6.3 (2022), 8.0 (5th Rev 2022), 4.3 (Act. 2022), 5.5 (5th Rev 2023), 5.5 (Proj. 2023), 5.8 (2024), 6.0 (2025), 6.2 (2026), 6.5 (2027), 6.8 (2028) (annual percent change).
- Targeted lending schemes and dollarization:
  - Demand for CBJ’s subsidized SME lending scheme has slowed down significantly and expired at end-April 2023.
  - Ample reserves have kept dollarization down: Deposit Dollarization (In percent) and NIR ($bn, RHS) tracked 2013–2023.

### Macroeconomic outlook and selected projections (summary)
- Output and prices:
  - Nominal GDP at market prices (JD millions): 32,033 (Act. 2021), 34,624 (Act. 2022), 33,691 (5th Rev 2022), 36,911 (Act. 2022), 35,465 (5th Rev 2023), 39,004 (Proj. 2023), 37,333 (2024), 39,415 (2025), 41,612 (2026), 43,932 (2027), 46,381 (2028).
  - Nominal GDP at market prices ($ millions): 45,180 (Act. 2021), 48,836 (Act. 2022), 47,519 (5th Rev 2022), 52,060 (Act. 2022), 50,022 (5th Rev 2023), 55,013 (Proj. 2023), 52,656 (2024), 55,592 (2025), 58,691 (2026), 61,963 (2027), 65,418 (2028).
- Labor:
  - Unemployment rate (period average, percent) reported as 24.1 (Act. 2021) and 22.9 (Act. 2022) in the table header notes (methodology change reported for 2017).
- Monetary aggregates:
  - Broad money (annual percent change): 6.7 (Act. 2021), 6.6 (2022), 5.5 (5th Rev 2022), 6.6 (Act. 2022), 5.6 (5th Rev 2023), 5.7 (Proj. 2023), 5.6 (2024), 5.6 (2025), 5.6 (2026), 5.6 (2027), 5.6 (2028).

### Policy recommendations and support needs
- Modify end-December 2023 program conditions:
  - Lower the PC on the central government primary deficit (excluding grants and transfers to NEPCO and WAJ) to keep fiscal consolidation on track.
  - Lower the PC on the CBJ’s NIR to provide headroom amid external uncertainty.
- Continue to mobilize stronger and timely development partner support to:
  - Help Jordan cope with global economic headwinds.
  - Address climate change challenges.
  - Shoulder the burden of hosting a large number of refugees.
- Proceed with preparations for a possible successor arrangement that could be combined with support under the RST.

*Source: IMF staff and Jordanian authorities (excerpted content from the provided chapter).*

### 1. Central government primary balance (ex grants)-1,444-1,298    -1,233-1,088    -1,014-680-739-434-83264232

### 1jorea2023003 - 1. Central government primary balance (ex grants)-1,444-1,298    -1,233-1,088    -1,014-680-739-434-83264232

### Central government primary balance (ex grants)
- Levels: -1,444 -1,298 -1,233 -1,088 -1,014 -680 -739 -434 -832 642 32
- (in percent of GDP): -4.5 -3.7 -3.7 -2.9 -2.9 -1.7 -2.0 -1.1 -0.2 0.6 0.5

### Balance of utilities (NEPCO, WAJ, water distribution companies)
- Levels: -451 -462 -519 -593 -691 -539 -646 -589 -537 -506 -494
- (in percent of GDP): -1.4 -1.3 -1.5 -1.6 -1.9 -1.4 -1.7 -1.5 -1.3 -1.2 -1.1

### Combined public balance (1+2)
- Levels: -1,895 -1,761 -1,751 -1,682 -1,706 -1,219 -1,386 -1,023 -621 -242 -262
- (in percent of GDP): -5.9 -5.1 -5.2 -4.6 -4.8 -3.1 -3.7 -2.6 -1.5 -0.6 -0.6

### SSC balance
- Levels: 965 993 865 1,119 1,162 1,022 1,094 1,119 1,168 1,174 1,223
- (in percent of GDP): 3.0 2.9 2.6 3.0 3.3 2.6 2.9 2.8 2.8 2.7 2.6

### General government primary balance (ex grants) (3+4)
- Levels: -784 -563 -741 -361 -344 22 -723 337 981 1,199 1,243
- (in percent of GDP): -2.4 -1.6 -2.2 -1.0 -1.0 0.1 -0.2 0.8 1.9 2.7 2.7

### General government overall balance
- Levels: -1,140 -986 -1,309 -978 -939 -865 -968 -818 -436 -151 117
- (in percent of GDP): -3.6 -2.8 -3.9 -2.6 -2.6 -2.2 -2.6 -2.1 -1.0 0.0 0.3

*https://www.imf.org/-/media/files/publications/cr/2023/english/1jorea2023003.pdf*

### 7. General government balance excluding grants -1,954-1,836    -2,139-1,787    -1,785-1,591    -1,730    -1,423    -1,03

### 7. General government balance excluding grants -1,954-1,836    -2,139-1,787    -1,785-1,591    -1,730    -1,423    -1,031-628-529

### General government fiscal balances and debt
- General government balance excluding grants (levels): -1,954 -1,836 -2,139 -1,787 -1,785 -1,591 -1,730 -1,423 -1,031 -628 -529
- General government balance excluding grants (in percent of GDP): -6.1 -5.3 -6.3 -4.8 -5.0 -4.1 -4.6 -3.6 -2.5 -1.4 -1.1
- Consolidated debt of general government (Debt = t-1 + Net borrowing) (levels): 29,373 31,064 30,668 32,560 32,132 33,615 33,321 34,503 35,359 35,984 36,997
- Consolidated debt of general government (in percent of GDP): 91.7 89.7 91.0 88.2 90.6 86.2 89.3 87.5 85.0 81.9 79.8
- Unconsolidated debt of general government (levels): 36,376 39,167 37,990 41,563 40,354 43,668 42,593 44,825 46,781 48,506 50,394
- Unconsolidated debt of general government (in percent of GDP): 113.6 113.1 112.8 112.6 113.8 112.0 114.1 113.7 112.4 110.4 108.7

### Net borrowing need, financing, and related adjustments
- Net borrowing need — General government overall deficit incl. discretionary measures (levels): 1,140 986.0 1,309 978.0 93 9865.0 9688 1843 615 -117
- Prefunding of amortizing debt and use/buildup of deposits (levels): 242 242 151 51 11 11 11 13 13 14
- SSIF investment outside GG (levels): 774 313 526 406 434 594 885 706 256 911 1,024
- Guaranteed off-budget project loans (levels): 19 6264  3639   67686043   5092
- CBJ repurchases in respect of 2012 EFF (levels): 4 -13 -1 -172 -173 -346 -346 -277 -260 -143 0
- Recapitalization and guarantee of Royal Jordanian (levels): 350000000000
- Securitization of domestic arrears (levels): 105

### Memorandum and key fiscal statistics
- SSIF interest income government debt (levels): 378 420 287 421 381 486 444 501 557 617 676
- SSIF government debt holding (% of total Assets): 57 54 54  54 55   56 56 57 57   58 57
- Nominal GDP at market prices (levels): 32,033 34,624 33,691 36,911 35,465 39,004 37,333 39,415 41,612 43,932 46,381

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

### Central government: Summary of Quarterly Fiscal Operations, 2023–24 (selected aggregates)
- Total revenue and grants (quarterly/annual, levels): 2,099 2,228 2,657 2,542 9,525 1,940 2,596 1,873 2,971 9,858
- Domestic revenue (levels): 2,069 2,174 2,156 2,311 8,710 1,940 2,568 1,824 2,316 9,126
- Tax revenue (of which, levels): 1,600 1,565 1,586 1,823 6,574 1,517 2,024 1,322 1,669 7,009
  - Taxes on income and profits: 446 706 354 191 1,697 407 777 365 249 1,797
  - Sales taxes: 1,063 768 1,144 1,540 4,516 998 1,138 842 1,312 4,767
  - Taxes on foreign trade: 656 461 662 578 0 778 827 531 5
- Grants (levels): 305 350 123 181 502 849 655 732
- Total expenditures, inc. other use of cash (levels): 2,477 2,864 2,572 3,179 11,346 2,519 2,789 2,953 3,201 11,717
- Current expenditure (levels): 2,177 2,402 2,178 2,844 9,854 2,236 2,365 2,480 2,906 10,240
  - Wages and salaries (levels): 480 501 498 493 1,972 490 512 509 503 2,013
  - Interest payments (levels): 399 416 371 436 1,622 427 418 525 481 1,852
    - Domestic: 289 263 253 268 1,073 305 292 337 293 1,228
    - External: 110 153 118 167 548 123 126 188 187 624
- Capital expenditure (levels): 171 412 294 615 1,492 153 375 374 575 1,477
- Overall balance of the central government at current policies (quarters/annual, levels): -378 -636 84 -638 -1,821 -579 -194 -1,080 -230 -1,860
- Financing (quarterly aggregates, levels): 439 668 186 662 2,128 662 274 1,080 347 2,147
  - Foreign financing (net) 1/: -268 846 307 306 1,191 533 017 228 1537
  - Domestic financing (net): 708 -179 -289 360 938 608 244 908 661 1,610
- Government and guaranteed gross debt (levels): 39,570 40,374 40,406 41,475 40,354 43,579 45,610 47,304 48,775 42,593
- Government and guaranteed gross debt, net of SSC's holdings (levels): 32,567 33,370 33,402 34,471 33,350 36,575 38,607 40,300 41,772 35,589

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

### NEPCO: Operating balance and financing (2021–28) — key figures
- Revenues (levels): 1,311 1,328 1,361 1,420 1,404 1,515 1,491 1,549 1,611 1,656 1,686
- Electricity sales (levels): 1,286 1,328 1,334 1,370 1,374 1,465 1,447 1,502 1,559 1,600 1,627
- Expenses (selected projected levels): 1,464 1,549 1,594 1,758 1,807 1,810 1,892 1,909 1,926 1,942 1,964
- Purchase of electricity (levels): 1,303 1,325 1,458 1,534 1,584 1,570 1,650 1,649 1,652 1,652 1,659
- Interest payments 2/ (levels): 110 164 116 164 162 181 182 200 214 230 244
- Operating balance (QPC, levels): -153 -220 -233 -338 -402 -296 -371 -330 -285 -256 -247
- Total net domestic financing (levels): 153 220 233 338 402 296 371 330 285 256 247
- Outstanding loans and bonds (stocks, end-of-period) (levels): 2,728 3,164 3,124 3,502 3,814 3,798 4,185 4,515 4,800 5,056 5,303
- Total payables (levels): 3,175 3,075 3,303 3,075 3,159 3,075 3,159 3,159 3,159 3,159 3,159
- Memorandum: Operating balance (percent of GDP): -0.5 -0.6 -0.7 -0.9 -1.1 -0.8 -1.0 -0.8 -0.7 -0.6 -0.5
- Brent oil prices (USD per barrel): 69 98 96 86 73 80 69 67 65 64 63

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

### WAJ and Water Distribution Companies (2021–28) — selected figures
- WAJ total revenues (levels): 31  41 28 42 29 43 30 31 31 32 33
- WAJ current expenditure (levels): 130 136 101 134 111 136 113 112 114 115 117
- WAJ overall balance (levels): -225 -267 -261 -275 -264 -263 -253 -239 -232 -231 -230
- Overall balance of Distribution Companies (levels): -51 -10 -25 -20 -25 -10 -23 -20 -20 -19 -17
- Consolidated Water Sector overall balance (levels): -276 -277 -286 -285 -289 -273 -275 -260 -252 -250 -247
- Total net financing (levels): 276 277 286 285 289 273 275 260 252 250 247
- Grants (levels): 113 53 8 30 30 30 30 30 30 30 30
- Transfers from Central Government (levels): 221 289 202 281 296 243 245 190 182 180 177
- Outstanding loans, of which (levels): 2,565 2,894 2,789 3,215 3,125 3,498 3,410 3,640 3,862 4,082 4,299
- Domestic payment arrears of WAJ in JD million: 90 55 48 20 20 00 00 00 00 00 0

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

### Balance of Payments and External Sector (selected aggregates)
- Current account (CA) (levels): -3,723 -3,795 -4,165 -2,967 -3,752 -2,598 -2,833 -2,199 -1,731 -1,980 -2,313
- Trade balance (levels): -9,823 -11,898 -11,912 -10,654 -10,284 -10,823 -9,882 -9,834 -10,051 -10,702 -12,071
- Exports f.o.b. (levels): 9,371 11,997 12,398 12,244 12,575 11,538 12,072 12,559 13,334 13,821 14,316
- Imports f.o.b. (levels): 19,194 23,895 24,310 22,898 22,858 22,361 21,954 22,393 23,385 24,522 26,387
- Energy imports (levels): 3,017 4,387 4,422 3,868 3,543 3,790 3,420 3,406 3,420 3,437 3,467
- Travel receipts (levels): 2,762 5,897 5,816 6,169 6,174 6,605 6,582 7,104 7,617 8,164 8,753
- Current transfers (net) (levels): 5,974 6,332 5,974 6,627 5,754 6,687 5,736 5,682 5,780 5,519 5,626
  - Public grants (levels): 1,705 1,499 1,861 1,599 1,651 1,423 1,474 1,330 1,315 950 950
  - Remittances (levels): 3,062 3,487 3,107 3,690 3,187 3,923 3,366 3,472 3,574 3,670 3,769
- Capital and financial account (levels): 944 895 -127 2,232 2,494 1,976 1,460 2,611 2,839 3,002 3,590
- Overall balance (levels): -949 -2,900 -2,985 -736 -1,258 -622 -1,373 411 1,108 1,022 1,277
- Financing items — Program financing (levels): 1,868 1,838 1,859 1,436 1,712 718 884 398 222 -131 -260
- Gross reserves (levels): 19,045 17,834 18,190 18,334 18,445 18,231 17,756 18,565 19,895 20,786 21,804
- Current account (percent of GDP): -8.2 -7.8 -8.8 -5.7 -7.5 -4.7 -5.4 -4.0 -2.9 -3.2 -3.5
- Current account ex-grants (percent of GDP): -12.0 -10.8 -12.7 -8.8 -10.8 -7.3 -8.2 -6.3 -5.2 -4.7 -5.0

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

### External financing requirements and foreign-exchange needs
- Gross financing requirements (levels): 5,976 8,171 6,036 7,068 4,779 5,871 5,350 5,274 5,162 3,974
- Gross financing sources (levels): 4,665 4,226 4,968 5,476 3,701 4,043 5,552 6,185 5,949 4,991
- Total financing needs (1)+(2)-(3)-(4) (levels): 1,868 1,893 1,569 1,846 975 1,140 607 419 104 0 0
- External budget financing — Budget grants (levels): 1,058 1,104 1,023 1,769 905 1,651 1,497 1,482 1,395 1,395
- External budget financing — Loans (levels): 1,513 1,546 1,685 1,961 1,067 1,232 819 631 316 316

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

### Monetary and central bank indicators (selected)
- Broad money (levels, JD millions): 39,495 42,105 41,672 44,885 44,002 47,431 46,452 49,042 51,776 54,662 57,710
- Year-on-year broad money growth (percent): 6.7 6.6 5.5 6.6 5.6 5.7 5.6 5.6 5.6 5.6 5.6
- Net foreign assets (levels, JD millions): 7,467 6,964 6,911 8,133 7,296 8,353 7,672 8,373 9,434 10,209 11,091
- Net domestic assets (levels, JD millions): 32,029 35,141 34,760 36,752 36,706 39,078 38,780 40,669 42,341 44,453 46,619
- Claims on the private sector (levels): 27,559 29,279 29,759 30,542 31,387 32,231 33,201 35,209 37,407 39,820 42,513
- Central bank net foreign assets (levels, JD millions): 11,736 11,127 11,435 12,154 11,677 12,233 11,912 12,613 13,674 14,449 15,331
- Gross international reserves ($ millions): 19,045 17,833 18,190 18,334 18,417 18,230 17,700 18,480 19,779 20,638 21,621
- Gross usable international reserves ($ millions): 17,272 16,060 16,432 16,561 16,687 16,458 15,998 16,808 18,138 19,029 20,046

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

### IMF financing under the Extended Fund Facility (EFF) and indicators of Fund credit
- EFF access and phasing (SDR Million / Percent of Quota):
  - March 25, 2020 Board approval of EFF: 102.930 / 30.0
  - First Review (September 30, 2020): 102.930 / 30.0
  - Second Review (March 30, 2021): 144.102 / 42.0
  - Third Review (September 30, 2021): 240.170 / 70.0
  - Fourth Review (March 30, 2022): 137.240 / 40.0
  - Fifth Review (September 30, 2022): 257.325 / 75.0
  - Sixth Review (March 30, 2023): 24.0 / 7.0
  - Seventh Review (September 30, 2023): 48.0 / 14.0
  - Eighth Review (March 15, 2024): 89.206 / 26.0
  - Total: 1145.954 / 334.0
- Stock of existing and prospective Fund credit (SDR, end period, selected): 365.17 720.4 1,091.8 1,469.3 1,441.3 1,338.9 1,182.6 1,035.6 861.5 668.7 480.3
- Stock of existing and prospective Fund credit (percent of quota): 106.4 210.0 318.2 428.2 420.1 390.2 344.7 301.8 251.1 194.9 140.0

*Source: IMF staff estimates.*

### Program monitoring: Quantitative performance criteria and indicative targets (Dec 2022–Dec 2023) — selected outcomes
- Primary fiscal deficit of central government, excluding grants and net transfers to NEPCO and WAJ (JD millions): Adjusted Actual 1,298 1,251 1,233 — Met; Proposed PC 300 269 218 — Met; Dec-23 targets: 650 850 1,088 1,014
- Combined public deficit (flow, cumulative ceiling) (JD millions): 1,848 1,801 1,751 — Met; Proposed PC 650 619 1,300 1,550 1,682 1,682
- Net International Reserves of the Central Bank of Jordan (USD million, stock, floor): 13,226 13,231 13,585 — Met; Dec-23 targets: 12,644 12,745 13,967 13,493
- Ceiling on accumulation of external debt service arrears: 0 0 — Met; continuous
- Indicative targets — Social spending by the central government (flow, cumulative floor) (JD millions): 896 1,171 — Met; Proposed and subsequent targets reported (151 155 Met; 266 603 532 941)
- Public debt (stock, ceiling) (JD millions): 31,764 30,668 — Met; Dec-23: 32,162 32,361 32,560 32,546
- Domestic payment arrears of NEPCO (stock, ceiling) (JD millions): 0 144 Not Met; subsequent Not Met status reported
- Net Domestic Assets of the Central Bank of Jordan (stock, ceiling) (JD millions): 695 690 -480 Met; Dec-23 targets: 682 695 265 265

*Notes within table specify adjustors and definitions used for monitoring.*

### Structural conditionality: Status of existing and proposed measures (selected)
- Proposed new structural benchmarks (time frames and rationales):
  1. Issue a Cabinet decision to establish an inter-ministerial committee to determine total outstanding arrears in health and energy sectors — July 2023 — Rationale: Improving fiscal discipline and transparency.
  2. Establish MOUs to allow the Department of Statistics regular access to MOF, ISTD, CCD, and CBJ data sources — September 2023 — Rationale: Ensuring accurate and timely data dissemination including national accounts.
  3. Hire an internationally renowned consulting firm to review the electricity system and propose actions for NEPCO's financial sustainability — November 2023.
  4. Set up a multi-agency crisis management committee (CBJ, MoF, JODIC) — December 2023 — Strengthen crisis management.
  5. Issue instructions implementing new amendments of the Labor law under Article 69-B expanding protections for pregnant women and persons with disabilities — December 2023 — Supporting female labor force participation.
- Existing structural benchmarks (status: Met / Not Met / Reset where indicated):
  - Publish 2019 annual and revised quarterly GDP data — March 2023 — Met.
  - Issue cabinet decision for joint committee between MoF and Ministry of Water and Irrigation to clear water sector arrears by end-March 2024 — March 2023 — Met.
  - Implement time-of-use tariffs and other adjustments to generate JD 50 million revenue for NEPCO in 2023 — May 2023 — Met.
  - Apply e-audit system using AI to all submitted tax returns — June 2023 — Met.
  - Launch e-invoicing for one-third of sales transactions — June 2023 — Met.
  - Develop risk-based capital and solvency regime for insurance sector — June 2023 — Met.
  - Start implementation of digital track-and-trace for alcohol companies — June 2023 — Reset to December 2023.
- Additional structural benchmarks with later due dates (examples): Implement FATF action plan items — October 2023; Submit legislation to abolish five tourism licenses — December 2023; Publish Fiscal Risk Statement with 2024 budget — December 2023.

*Status table notes clarify scope of arrears, exclusions (advances from central government), and aggregation conventions.*

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

### Appendix I. Letter of Intent

### Appendix I. Letter of Intent

### Context
- Global headwinds affecting Jordan: tightening and volatile global financial conditions; repercussions of a prolonged Russian war in Ukraine; risks from global economic fragmentation; lingering effects from the pandemic.
- Domestic challenges: unemployment remains very high, especially youth unemployment.
- Program objectives under the EFF: preserving debt sustainability and external buffers; maintaining monetary and financial stability; advancing structural reforms to achieve higher and more inclusive growth.
- Policy anchors: commitment to the exchange rate peg to the U.S. dollar and monetary policy adjustments in line with actions of the U.S. Federal Reserve.
- New framework: Economic Modernization Vision launched in June 2022 to guide efforts to improve the business climate and enhance competitiveness, including to attract FDI.
- Refugee burden: hosting 1.3 million Syrian refugees; need for a more reliable stream of financing in line with pledges under the Jordan Compact and the 2019 London Initiative.

### Program Performance and Recent Results
- End-December 2022 quantitative performance criteria (QPCs) met for:
  - central government primary deficit (excluding grants),
  - combined public deficit,
  - net international reserves (NIR).
- Most indicative targets (ITs) met.
- Six structural benchmarks (SBs) met; additional SBs implemented:
  - Cabinet decision for joint committee between Ministry of Finance and Ministry of Water and Irrigation to meet quarterly to clear all water sector arrears by end-March 2024.
  - Department of Statistics published 2019 annual and revised quarterly GDP data.
  - E-auditing systems applied to all submitted tax returns; e-invoicing system launched for over half of all sales transactions by value (exceeding the target of one third).
  - Measures implemented to generate JD 50 million in revenue for NEPCO in 2023.
  - CBJ developed a risk-based capital and solvency regime for the insurance sector.
- Continued strong 2023 performance: indicative targets on central government primary deficit (excluding grants), combined public deficit, and NIR met.

### Macroeconomic Developments and Outlook
- Real GDP growth: reached 2.5 percent in 2022, buoyed by exports and tourism.
- Unemployment:
  - overall unemployment rate: 22.9 percent by end-2022 (from 24.1 percent in 2021).
  - youth unemployment: 50 percent in 2022.
  - female unemployment: 31.4 percent in 2022.
- Inflation: 2.9 percent y-o-y in April 2023.
- Current account:
  - 2022 current account deficit: 8.8 percent of GDP.
  - Expected to narrow to 7.5 percent of GDP going forward.
- External position: international reserves at just over 100 percent of the ARA metric.
- Market access: issued a 6-year US$1.25 billion bond at 7½ percent in April 2023 (noted elsewhere as $1.25 bn billion in text).
- Growth projections:
  - 2023: 2.6 percent.
  - 2024: 2.7 percent.
  - Medium term: gradually rise to 3 percent.
- Risks: volatile and tightening global financial conditions; slower-than-expected global growth; stubbornly high unemployment; geopolitical tensions; declining donor support for Syrian refugees and shortfalls in humanitarian support via UNHCR and WFP.
- Opportunities: regional political rapprochement; higher commodity prices supporting mining exports; increased remittances, tourism, and investment.

### Fiscal Policy and Structural Fiscal Reforms
Findings and recent fiscal outcomes:
- 2022 primary deficit (excluding grants and transfers to NEPCO and WAJ): JD 1,233 million, or 3.7 percent of GDP; fiscal consolidation of 0.8 percent of GDP in 2022.
- Domestic revenues through March 2023 increased by 9.1 percent y-o-y, mainly driven by taxes on income and profits.
- 2023 budget aim: primary deficit (excluding grants and transfers to NEPCO and WAJ) of JD 1,014 million, or 2.9 percent of GDP, implying a further consolidation of 0.8 percent of GDP.

Commitments and planned measures:
- Price policy: fully align gasoline and diesel prices with international market prices; protect vulnerable households through cash transfers.
- Use revenue overperformance to pay off more expensive debt and not shift capital spending to current spending.
- Contingency: postpone non-priority spending if risks materialize to meet fiscal targets.
- Debt objective: reduce public debt from 92 percent of GDP in 2021 to below 80 percent of GDP by 2028.
- Target: bring the general government overall balance to zero by 2027 through revenue increases and streamlined current spending.

Revenue measures:
- Additional revenue measures yielding 1.5 percent of GDP over 2024–28.
- New legislative and administrative reforms expected to generate:
  - 0.4 percent of GDP in revenues in 2024,
  - 1.1 percent of GDP over 2025–28.
- Specific measures include:
  - broaden the income tax base by further rationalizing tax exemptions (including via the new investment law);
  - implement compliance improvement plans in the Large Taxpayer and Free Professionals Directorates;
  - broaden the GST base by implementing place of taxation rules and rationalizing GST exemptions via the new investment law;
  - anticipated reduction in smuggling following recent customs reform;
  - bring ASEZA within the national tax and customs systems to close key tax loopholes;
  - fully implement the track-and-trace system for alcohol;
  - better tackle cigarette smuggling through stronger inter-agency border control and improved domestic compliance enforcement.

Expenditure efficiency measures:
- Identified measures to deliver 0.2 percent of GDP in savings in 2024, and an additional 0.7 percent of GDP over 2025–28.
- Measures include:
  - contain growth of the public wage bill below nominal GDP growth and implement public administration reform strategy;
  - roll out e-procurement to the broader public sector;
  - efficiencies in the health care sector via improved targeting of exemptions and incentivizing more efficient use of resources in public hospitals;
  - improved administration of grain subsidies to reduce waste and leakage.

### Commitments, Requests, and Monitoring
- Request: completion of the sixth review under the extended arrangement and approval of the related purchase.
- Request: modification of the end-December 2023 performance criterion on:
  - the central government primary deficit (excluding grants and transfers to NEPCO and WAJ),
  - the CBJ’s net international reserves, as presented in Table 1 of the attached MEFP.
- Program monitoring: semi-annual quantitative performance criteria, structural benchmarks, and quarterly indicative targets as described in the MEFP and the attached Technical Memorandum of Understanding (TMU).
- Data provision: Government and CBJ will provide IMF with data and information necessary to monitor performance under the program as specified in the TMU.
- Expectations for reviews:
  - Seventh review: on or after September 30, 2023.
  - Last review: on or after March 15, 2024.
- Additional request: commence discussions on a potential new program complemented with financing under the Resilience and Sustainability Facility (RSF).

*Source: Letter of Intent and attached Memorandum of Economic and Financial Policies, Amman, June 12, 2023.*

### 11.      To durably improve the efficiency of public finances, we are advancing a broad set of

### To durably improve the efficiency of public finances, we are advancing a broad set of structural fiscal reforms

### Fiscal gap and reform yield (cumulative targets)
- Required discretionary effort to close the fiscal gap (cumulative): 0.6 1.2 2.5 (2024 2025 2028)
- Total expected yield from envisioned reforms (cumulative): 0.6 1.2 2.5 (2024 2025 2028)
- Revenue reforms (cumulative): 0.4 0.8 1.5 (2024 2025 2028)
- Expenditure reforms (cumulative): 0.2 0.4 1.0 (2024 2025 2028)
- Potential additional reforms (cumulative, subject to FAD technical assistance): 0.5

### Revenue reforms — measures and expected yields
- Broaden income tax base by rationalizing new CIT incentives (new investment law enacted in 2022); and improving compliance for large tax payers and free professionals (starting 2023): 0.1 0.2 0.4 (2024 2025 2028)
- Broaden GST base by introducing place of taxation rules (enacted in 2022); rationalizing new GST incentives (new investment law, see above); and recent customs reform to reduce avenues/incentives for smuggling: 0.1 0.2 0.4 (2024 2025 2028)
- Close tax loopholes by bringing ASEZA tax and customs functions within national systems (law passed in May 2022): 0.1 0.2 0.4 (2024 2025 2028)
- Introduce digital track-and-trace system (for all cigarette companies in 2022; and for alcohol by end-2023): 0.1 0.2 0.3 (2024 2025 2028)

### Expenditure reforms — measures and expected yields
- Further contain public wage bill growth to below nominal GDP growth from 2023: 0.1 0.2 0.4 (2024 2025 2028)
- Roll out JONEPS (e-procurement) in health and education ministries; to broader central and general government entities (starting 2024): 0.1 0.2 0.3 (2024 2025 2028)
- Improved efficiencies/reduced exemptions in the provision of health insurance: 0.0 0.0 0.2 (2024 2025 2028)

### (i) Tax policy and revenue administration — actions and targets
- Centralize incentivizing investment: MOF now has a central role in granting and managing all fiscal incentives; bylaws issued to implement the new Investment Environment Law.
- Annual MOF cost-benefit analyses of all new fiscal incentives and end-of-year reporting.
- Implementing the revenue mobilization plan (FAD-supported, 2021) covering tax policy and administration and implementing recent legislative reforms.
- ISTD measures: awareness campaigns, trainings, online guidelines to support transfer pricing and economic substance reforms.
- ISTD roadmap (FAD-supported) translating strategic objectives to timebound operational targets.
- Upgrade ISTD IT infrastructure with a new Integrated Tax Administration System (ITAS); tender for ITAS to be issued by December 2023.
- Strengthen ISTD audit function: implemented an e-audit system covering all tax returns (met SB for June 2023); further development to include comparative benchmarks for taxpayers by December 2023.
- Digital track-and-trace for alcohol: continued work, rollout planned by end-2023 (SB for June 2023, proposed reset to December 2023).
- Launched e-invoicing system (met SB for June 2023) covering 58 percent of sales transactions subject to GST by value (program target was one-third); target to cover 90 percent of sales transactions by end-2023.

### (ii) Social safety net — coverage and reforms
- Existing program includes a minimum threshold for social spending (IT): (i) non-wage components of education and health current expenditure; (ii) National Aid Fund’s (NAF) and other entities’ social protection programs; (iii) school feeding program.
- NAF coverage: more than 220,000 families.
- Temporary kerosene subsidy during winter months of 2023 by suspending excises (kerosene used mainly by poor households).
- Improvements to targeting methodology (with World Bank technical support): adjusted weights for dependent adult children and female-headed households.
- Integration objective: integrate all existing NAF programs for all Jordanian nationals into one single program by end-2024.
- Continued protection from higher international food prices extended till end-2023; exploring options with IMF FAD TA to optimize cost, strengthen supply-chain audits, and stiffen penalties for misuse.

### (iii) Public sector administrative reform and efficiency — roadmap targets
- Use Public Sector Modernization Roadmap to:
  - Strengthen regulatory bodies (start with Energy and Mining Regulatory Committee).
  - Revise civil service staffing practices to a merit-based system; begin implementation in January 2024 for all senior positions.
  - Continue digitalization of government services: digitalize at least 40 percent of all government services by end-2023 and at least 60 percent by end-2024.
- Commit to merging/restructuring public agencies and enhancing institutional roles to strengthen budgetary oversight and human resource planning.

### (iv) Public financial management (PFM) — arrears, committees, and reforms
- Health and energy arrears reached JD 205 million by end-December 2022, mainly from the health sector.
- Plan to issue a Cabinet decision to establish an inter-ministerial committee to determine total outstanding arrears based on certified and confirmed audits (proposed benchmark for July 2023).
- MOF to report on the stock of verified arrears in the first quarter of 2024.
- Requested TA from IMF and other partners on addressing health sector arrears; working to improve targeting of healthcare exemptions.
- Follow up on IMF TA recommendations on cash management, including cash forecasting and integrating cash and debt management to better manage cash flow volatility, reduce arrears, and improve prospects for domestic market financing.
- Strengthen top-down budgeting and improve fiscal projection quality to eliminate off-budget expenditures.

### (v) Public procurement — JONEPS rollout
- Continue JONEPS rollout for ministries and government entities; implement for all 100 government entities by end-2025.
- Government Procurement Department to work with municipalities, including GAM, to start JONEPS implementation through the Ministry of Local Administration by early-2024, including training key users.

### (vi) Fiscal transparency and fiscal risks management — disclosures and staffing
- Macro-Fiscal Unit (MFU) at MOF to prepare and publish a Fiscal Risk Statement with the 2024 budget, outlining key macroeconomic and contingent liabilities risks (SB for December 2023).
- Hiring a dedicated expert in the Fiscal Commitments and Contingent Liabilities (FCCL) unit to build risk assessment capacity for PPPs; expand FCCL coverage by end-December 2023 to three more of the largest existing PPPs (in addition to three covered in 2022).
- Continue publishing information on COVID related spending, including beneficial ownership of entities awarded contracts, on the MOF website.

### (vii) Investment quality and predictability — PIMA follow-up and PPPs
- Strengthen implementation of recommendations from the 2017 IMF Public Investment Management Assessment (PIMA) and 2020 follow-up.
- Build IT and human capacities for project appraisal and sustainability assessments.
- Requested a Climate PIMA to support climate adaptation investment agenda within the Economic Modernization Vision.
- Work to amend PPP legislation to streamline execution while maintaining safeguards and due diligence.

### (viii) Fiscal policy and debt management capacity — MFU strengthening
- Strengthen Macro Fiscal Unit (MFU) to produce medium-term macroeconomic forecasts and generate fiscal projections quarterly for the running budget year and annually for the medium term.
- MFU, with FAD assistance, will aim to assess and present dynamic and distributional impacts of revenue and expenditure measures as capacity enhances.
- Project Management Unit (PMU) in MOF credited with driving the structural fiscal reform agenda.

### Monetary and Financial Policies — CBJ stance and tools
- Monetary policy anchored by firm commitment to the exchange rate peg to the US dollar.
- Raised policy rates in line with the US Federal Reserve.
- Issued certificates of deposit (CDs) of JD700 million since August 2022 to tighten monetary policy.
- Credit to private sector growth: 6.8 percent y-o-y as of March 2023 (down from 8 percent y-o-y in December 2022).
- CBJ operational target: maintain international reserves above 100 percent of the IMF’s Reserve Adequacy Metric.
- CBJ to monitor economy and banking system liquidity and stands ready to adjust policy to protect monetary and financial stability.

### CBJ lending schemes and adjustments
- JD 700 million SME lending scheme launched during the pandemic; fully utilized and ended in April 2023.
- JD 1.4 billion scheme (created in 2011) to refinance bank loans for eligible projects and support productive sectors; plan to gradually reduce its concessionality.
- Interest rate on new loans under the JD 1.4 billion scheme to be raised by 50 basis points, effective from February 2024.

### Banking system soundness — key indicators
- System-wide capital adequacy: 17.3 percent at end-December 2022 (CBJ regulatory minimum: 12 percent).
- Non-performing loans: 4.5 percent as of end-December 2022 (down from 5 percent in 2021).
- Provisions in percent of classified loans: increased by 1.6 percentage points to 81.5 percent at end-December 2022.

### Supervision, stress-testing, and contingency planning
- CBJ conducts stress tests to ensure banks have sufficient buffers against rises in NPLs and profit hits.
- Banks required to follow strict provisioning standards, in line with IFRS9’s forward-looking expected loss approach.
- If capital adequacy falls below 12 percent for any bank, CBJ will require a credible capital restoration plan.

### FSAP findings and follow-up
- Joint IMF-World Bank Financial Sector Assessment Program (FSAP) completed in March 2023.
- FSAP systemic risk analysis: Jordan’s banking sector broadly resilient; withstood multiple large external shocks.
- Findings: credit concentration risk and banks’ exposures to the sovereign are large; banks have ample liquidity and limited contagion risk.
- Key FSAP recommendations:
  - Further strengthen banking supervision to be more risk-based and forward-looking; develop pillar 2 supervisory assessments for more risk-sensitive capital requirements.
  - Enhance systemic risk analysis by filling data gaps to enable consolidated stress tests, run systemic foreign currency liquidity analyses, and perform granular analyses of household and corporate vulnerabilities.
  - Improve the crisis management and bank resolution framework.
- Commitment to implement FSAP recommendations; plan to set up a multi-agency crisis management committee (based on an MoU) comprising the CBJ, MoF, and JODIC to operationalize the crisis management framework (proposed SB for December 2023).

### Insurance sector reforms
- Developed a risk-based capital and solvency regime for the insurance sector (met SB for June 2023).
- Objectives: (i) provide incentives for insurers to better manage risks; (ii) help CBJ assess risk profiles of insurers and the market.
- Solvency margin instructions issued in June 2023 (developed with World Bank).

### AML/CFT enhancements
- Strengthening implementation of Jordan’s FATF action plan by end-October 2023 (SB for October 2023).
- Jordan’s third FATF progress report: 17 action items out of 24 addressed or largely addressed; significant steps on remaining 7 actions.
- Fourth progress report discussed with joint group; feedback expected by end-May 2023.
- Measures taken:
  - Increase AML/CFT supervisors and provide training.
  - Increase on-site inspections for risk-based supervision.
  - Ensure compliance with Security Council resolutions on terrorism and proliferation financing.
  - Apply proportionate and dissuasive financial sanctions on regulated FIs for regulatory breaches.
  - Raise awareness for regulated FIs and DNFBPs on Targeted Financial Sanctions via training and workshops.
  - Strengthen legal and operational TF-related TFS framework.
  - Make basic and beneficial ownership information accessible to competent authorities.
  - Maintain statistics on ML investigations and prosecutions.
  - Strengthen legal framework on confiscation and pursuing money laundering investigations and prosecutions for predicate offences in line with Jordan’s risk profile.
- Technical compliance: Jordan rated compliant or largely compliant with 32 out of 40 recommendations.

### IMF technical assistance and capacity development
- TA from IMF Institute for Capacity Development (ICD) on setting up a comprehensive monetary and economic policy modeling framework.
- MCM TA on conceptual and operational issues around central bank digital currency (CBDC); exploring wholesale vs. retail options.
- MCM TA (including training) on risk-based banking supervision.
- STA TA on redevelopment of property price indices, in particular residential property price indices.
- TA on monetary and financial statistics to expand coverage to Other Financial Corporations.

*Source: Content extracted from the provided IMF PDF chapter.*

### 20.      NEPCO’s financial outlook remains challenging. While NEPCO’s natural gas import prices

### 1jorea2023003 - 20.      NEPCO’s financial outlook remains challenging. While NEPCO’s natural gas import prices

### NEPCO: current outlook and pressures
- Natural gas import prices are expected to gradually decline—thanks to lower global prices and our long-term contracts—but electricity purchases from the oil shale PPA will exert significant pressures on NEPCO’s costs.
- Lower profitability in distribution companies has pushed NEPCO’s sales down by forcing reductions in the bulk supply tariff to honor EMRC’s legacy contractual profit margin commitments.
- Over the medium to long term, continued elevated generation costs and relatively weak electricity demand, as customers switch to self-generation, represent major pressures on NEPCO’s financial balance.

### Reforms implemented to shore up NEPCO’s finances (actions and immediate impacts)
- Action plan developed with World Bank and IMF staff aims to reduce NEPCO’s losses by JD 90 million in 2023 and JD 135 million in 2024.
- Measures implemented or underway:
  - Extended the connection fee for self-generation to businesses to compensate for use of NEPCO’s grid.
  - Enforcing annual KPIs for distribution companies to reduce technical losses and O&M expenses for 2023–2026.
  - Transferring mining royalties from oil shale PPA to NEPCO.
  - Introduced Time-of-Use tariffs.
  - Conducting a tariff review to identify incorrect subsidy inclusions.
  - Optimizing the use of the Rehab and Risha power plants.
- Results achieved:
  - These efforts will generate an additional JD 50 million in revenue for NEPCO in 2023 (met SB for May 2023).
  - Significant savings achieved by optimizing gas transportation costs.

### Planned reforms, timelines, and quantitative commitments
- Near-term and medium-term commitments:
  - Secure a telecom license to enable NEPCO to provide billable telecom services using its fiber optics infrastructure by December 2023.
  - Strengthen enforcement to reduce non-technical losses due to tampering with electricity meters.
  - Replace the Floating Storage Regasification Unit (FSRU) with cheaper substitutes by 2025.
  - Establish a specialized company for LNG purchases by 2026.
  - Hire an internationally renowned consulting firm to conduct a comprehensive review of the electricity system (generation, transmission, distribution) and propose actions to achieve NEPCO’s financial sustainability (proposed SB for November 2023).
  - Conduct a review of all renewable energy PPAs.
  - Strengthen electricity grid interconnections with neighboring countries, including Egypt, Syria, Iraq, and Saudi Arabia.
- Fiscal loss targets:
  - Ensure that NEPCO’s operational losses will not exceed 1 percent of GDP in 2024 and are gradually reduced to close to ½ percent of GDP over the medium term.

### Governance, risk management, and operational upgrades
- Strengthen separate disclosure of financial accounts of NEPCO’s four business units: bulk supply, system operator, gas supply and transmission.
- Enhance NEPCO Board roles and responsibilities to review, monitor and approve NEPCO’s strategy, budget and financing plan.
- Strengthen the role of the Risk and Audit Committee (NEPCO Board Resolution of October 2020) and implement the strategy and risk management function (NEPCO Board Resolution of August 2021).
- Expand NEPCO’s internal audit function with new methodologies, documentation and testing.
- Extend and revise NEPCO’s EHS (environmental, health and safety) management system to cover planning, construction and operation, aligned with international best practice.

### Arrears: commitments and timelines
- NEPCO continued efforts to repay arrears in 2022 but incurred new arrears to SAMRA and other energy companies.
- NEPCO plans to repay all arrears to other energy companies by end-September 2023.
- Commitment to settle the cross arrears between SAMRA, NEPCO, and the government by end-2023.

### Water sector reforms and targets
- Scaling up reforms to ensure sustainable water supply; implemented National Water Strategy (NWS) in line with the Cabinet-approved Financial Sustainability Roadmap (FSR) and MoU with the US.
- Objectives:
  - Optimize operating and maintenance costs, reduce non-revenue water (NRW), increase energy efficiency, and ensure revenues sufficient to achieve full cost recovery of water and wastewater services’ operations and maintenance by 2030 and including capital costs of build-operate-and-transfer projects by 2040.
- Progress and quantitative targets:
  - Since mid-2022, achieved a reduction in NRW by 2.3 percentage points, to 50 percent.
  - Target further reduction in NRW by 2–3 percentage points each year, to reduce NRW to 37 percent and 25 percent by 2030 and 2040, respectively.
  - Shifted from quarterly billing to monthly billing in the Aqaba area and rolling this out nationwide by end-2023.
  - Expect annual energy efficiency savings of 257 GWh.
- Agricultural water strategy under development, considering measures including reducing unauthorized freshwater use in agriculture, highland and desert groundwater conservation, rotational fallowing in highland and desert areas, and increasing treated wastewater use.
- Water sector arrears:
  - Current arrears stand at JD 80 million.
  - Issued cabinet decision establishing joint committee of the Ministry of Finance and the Ministry of Water and Irrigation to meet quarterly, with a view to clearing all arrears of the water sector by end-March 2024 (met SB for March 2023).

### Structural policies to promote jobs and growth (key labor and business reforms)
- Labor market context and targets:
  - Unemployment rate for Jordanians: 22.9 percent in 2022 Q4.
  - Youth unemployment: close to 50 percent.
  - Overall labor force participation rate: 33.4 percent.
  - Female labor force participation: 14 percent.
- Measures to increase labor force participation and generate jobs:
  - Female participation and protections:
    - Parliament passed Labor Law amendments enhancing protections for women from harassment and violence and removing restrictions on female employment in certain professions and industries.
    - Issue instructions implementing new amendments under Article 69-B to expand protections for pregnant women and persons with disabilities (proposed SB for December 2023).
    - Issued bylaws and instructions to support higher female participation in boards of state-owned enterprises and companies where the Social Security Investment Fund has representation.
  - Address labor market segmentation:
    - Repealed all Defense Orders, including Defense Order 6 which prohibited layoffs, to reduce segmentation and support a more dynamic labor market.
    - Comprehensive review of labor legislation in consultation with international development partners to be shared with IMF staff by end-November 2023.
    - Public Sector Modernization Roadmap: tie remuneration more closely to performance; develop an evaluation system linked to individual and institutional performance by September 2023; enable competitive hiring of candidates outside the existing pipeline starting in 2024.
  - Reduce youth unemployment:
    - Parliament passed amendments reducing the applicable social security contribution rate by the employer from 11 percent to 5.5 percent for new workers under age 30.
    - National Employment Scheme: around 55,703 applicants since launch; over 21,000 new hires as of April 30, 2023 (almost half female and over 1,600 NAF beneficiaries).
  - Encourage formality:
    - Ministry of Labor issued 62,457 working permits for Syrian refugees in 2022 and approximately 14,000 in the first quarter of 2023, while foregoing the JD 425 fee for each permit, allowing work in all sectors open to non-Jordanians with freedom to move between employers and areas.

### Business environment, competition, and governance measures
- Insolvency framework strengthened: licensing practitioners, training judges; established Insolvency Committee and Licensing and Monitoring Unit; eight registered cases in the insolvency registry; electronic registry aiming to be online by end-2023.
- Competition framework strengthened: new legislation sharpens definition for market concentration and stiffens penalties; Competition Directorate to complete sector studies (oil derivative and transport) and share with IMF staff by February 2024.
- Reduce entry barriers: abolish sectoral licenses for bookstores, cultural centers, and sport centers; submit legislation to abolish five other tourism-sector licenses identified in the 2019 cabinet decision (SB for December 2023).
- Trade and transport facilitation: Jordan Customs upgrading infrastructure to leverage the National Single Window for all points of border entry; streamlined pre-arrival approval process and reduced overlap in over 2,600 permit requirements across seven trade-related regulatory agencies; establish a single border authority under Jordan Customs.
- Strengthening anti-corruption and transparency:
  - Ensure the Integrity and Anti-Corruption Commission (IACC) is adequately resourced and implement amendments to the Illicit Gains Law (August 2021) and the IACC law (2022); exploring further legislative changes and bylaws to criminalize illicit gains from public procurement.
  - Established a beneficial ownership registry per real beneficiary registry bylaw No. 62 of 2022 (came into effect in February 2023); Companies Control Department mandated disclosure of real beneficiaries and maintenance of a special register to be updated within 30 days of any modification.

### Data, statistics, and program monitoring
- Statistical improvements:
  - Department of Statistics (DoS) published the 2019 annual and revised quarterly GDP statistics in March 2023 (met SB for March 2023).
  - DoS will adhere to a regular publication and revision schedule that includes revisions to quarterly GDP based on annual GDP estimates.
  - Establish MOUs to give DoS regular and timely access to latest legally permissible government (MOF, ISTD, CCD) and CBJ data sources, with a clear schedule for data dissemination (proposed SB for September 2023).
- Program monitoring:
  - Progress monitored through semi-annual reviews, quantitative performance criteria (PCs), indicative targets (ITs), and structural benchmarks (SBs).
  - Quantitative targets for June 2023 and December 2023 are PCs; details provided in Tables 1 and 2 and the Technical Memorandum of Understanding.
  - IMF disbursements will be on-lent to the government during the program period.
  - Memorandum of Understanding signed between the CBJ and the Ministry of Finance on responsibilities for servicing financial obligations to the IMF.
  - MOF to provide monthly data on wheat and barley purchases together with tender details and proceeds from sales to the mills (Technical Memorandum of Understanding ¶57).
  - Authorities will produce and share quarterly and annual financial results of the electricity sector (NEPCO and the three distribution companies), and water sector without delay, to allow for timely program monitoring.

*Source: Excerpt from the IMF staff report chapter on Jordan (content unit 1jorea2023003).*

### 1. This memorandum sets our understandings between the Jordanian authorities and IMF staff

### 1jorea2023003 - 1. This memorandum sets our understandings between the Jordanian authorities and IMF staff

### Program scope and exchange rate / gold price specifications
- Arrangement: Extended Fund Facility; quantitative performance criteria and indicative targets reported in Table 1 attached to the MEFP dated June 12, 2023.
- Exchange rate of the Jordanian dinar to the U.S. dollar: JD 0.709 = $1.
- Gold price for program measurement (NIR): JD 1046.52 per fine troy ounce.
- Program exchange rates (Jordanian Dinar Per Unit of Foreign Currency):
  - British Pound: 0.911106
  - Japanese Yen: 0.006505
  - Euro: 0.786889
  - Canadian dollar: 0.538721
  - SDR: 0.975744

### Monitoring framework and general provisions
- Any developments that could lead to a significant deviation from quantitative program targets will prompt discussions between the authorities and IMF staff on an appropriate policy response.
- For program monitoring purposes, "debt" is defined as set forth in paragraph 8(a) of the Guidelines on Public Debt Conditionality in Fund Arrangements attached to Executive Board Decision No. 15688-(14/107), adopted December 5, 2014.
- Monitoring frequency and measurement:
  - Central government primary fiscal deficit (and combined public deficit) and indicative targets on social spending: monitored semi-annually (with indicative targets for other quarters) on a cumulative basis from the beginning of the calendar year.
  - NIR (CBJ), public debt (including short-term public debt), domestic payment arrears of NEPCO, WAJ, and Aqaba/Miyahuna/Yarmouk, and NDA of the CBJ: monitored semi-annually (with indicative targets for other quarters) in terms of stock levels.
  - Accumulation of external debt service arrears: monitored continuously.

### Quantitative performance criteria and indicative targets (listed objectives)
- Performance criterion (ceiling) on the primary fiscal deficit of the central government excluding grants and net transfers to NEPCO and the state-owned water sector.
- Performance criterion (ceiling) on the combined primary deficit of the central government (as defined), the operational loss of NEPCO, the overall deficit of WAJ, and the overall deficit of Aqaba, Miyahuna, and Yarmouk water companies (“combined public deficit”).
- Performance criterion (floor) on the net international reserves (NIR) of the Central Bank of Jordan (CBJ).
- Continuous performance criterion (zero ceiling) on the accumulation of external debt service arrears.
- Indicative target (floor) on social spending by the central government.
- Indicative target (ceiling) on public debt, net of SSC’s holdings of government debt.
- Indicative target (ceiling) on the domestic payment arrears of NEPCO.
- Indicative target (ceiling) on the domestic payment arrears of WAJ.
- Indicative target (ceiling) on the domestic payment arrears of Aqaba, Miyahuna, and Yarmouk Water Companies.
- Indicative target (ceiling) on the net domestic assets (NDA) of the CBJ.
- Indicative target (ceiling) on the Social Security Investment Fund’s net financing to the central government.

### Central government primary deficit: definition and components
- Central government scope: budgetary central government covered by the annual General Budget Law (GBL); measured on a cash basis.
- Primary deficit of the central government excluding grants and net transfers to NEPCO and the state-owned water sector is defined as the sum of:
  - (i) net external financing of the central government;
  - (ii) receipts from the sale of government assets received during the relevant period;
  - (iii) net domestic bank financing of the central government;
  - (iv) net domestic nonbank financing of the central government;
  - (v) grants received from abroad by the central government, including grants from the Gulf Cooperation Council;
  - less (vi) domestic and foreign interest payments by the central government; and
  - (vii) net transfers from the central government to NEPCO and the state-owned water sector.
- Definitions of components:
  - Net external financing: cash external debt disbursements received by the central government less external debt repayments paid by the central government; covers central government debts and foreign debts channeled through the central government to the rest of the public sector.
  - Receipts from sale of government assets: transfers of monies to the central government from sale of shares, sale of non-financial assets, leases and sale of licenses or exploration rights with duration of 10 years and longer.
  - Net domestic bank financing: change in banking system’s claims in JD and foreign currency on the central government, net of the General Treasury Account balance with the CBJ.
  - Net domestic nonbank financing: central government borrowing from, less repayments to, the non-bank sector (including the nonfinancial public sector not covered by the general budget and the Social Security Investment Fund); equivalent to cumulative change since December 31 of the previous year in stocks of government debt held by nonbanks and in the float.
  - Net transfers to NEPCO and state-owned water sector: (i) direct transfers (including subsidies, cash advances, payment of debt or guarantees if called) minus (ii) any transfers of cash from those entities to the central government (including repayments of debt, arrears or cash advances).

### Adjustors to the primary deficit ceiling
- Downward adjustment by 50 percent of the shortfall if foreign budgetary grants received by the central government during the relevant period fall short of levels in Table 1 of the MEFP.
- Upward adjustment by 50 percent of the overperformance if foreign budgetary grants received exceed levels in Table 1 of the MEFP.
- Downward adjustment by the extent the combined stock of health and energy arrears by the central government exceeds the projected combined stock of health and energy arrears specified in Table 1 of the MEFP, excluding one-off settlement operations (e.g., write-off of intra-governmental claims).
- Upward adjustment by the extent the stock of arrears by WAJ and the distribution companies falls below the projected stock of arrears in Table 1 of the MEFP, excluding one-off settlement operations.
- Downward adjustment by the extent the stock of uncashed central government checks exceeds JD 200 million (the programmed stock in Table 1 of the MEFP) in case of the end-year indicative target or performance criterion.
- For 2022: upward adjustment by up to JD 110 (0.3 percent of GDP) should weekly cases, hospitalizations or the share on non-fully-vaccinated population exceed levels agreed in the Cabinet.

### Combined public deficit: definition and adjustors
- Combined public deficit defined as the sum of:
  - (i) primary deficit of the central government excluding grants and net transfers to NEPCO and the state-owned water sector (as above);
  - (ii) operational loss of NEPCO;
  - (iii) overall deficit of the state-owned water sector.
- NEPCO operational loss: difference between total operating revenues and total costs for normal operations in the year (unaudited income statement). Total operating revenues exclude proceeds from central government transfers or payments on NEPCO’s behalf. Total costs include purchase of electric power, fuel transportation costs, depreciation, maintenance and operating expenses (including wages and board remuneration), provisions, interest expense and other financial costs.
- State-owned water sector overall balance: difference between total revenues and current and capital expenditures. Total revenues exclude grants and proceeds from central government transfers or payments on the sector’s behalf. Current and capital expenditures include salaries, wages and allowances; social security contributions; use of goods and services (including energy costs); interest payments; other expenses, including pensions; and capital expenditures.
- Adjustors to the combined public deficit:
  - Downward by 50 percent of shortfall in foreign budgetary grants relative to Table 1 of the MEFP.
  - Upward by 50 percent of overperformance in foreign budgetary grants relative to Table 1 of the MEFP.
  - Downward by the extent the combined stock of health and energy arrears exceeds projections in Table 1 of the MEFP, excluding one-off settlement operations.
  - Downward by the extent uncashed central government checks exceed JD 200 million for end-year targets.
  - For 2022: upward adjustment by up to JD 110 (0.3 percent of GDP) contingent on public-health triggers agreed in the Cabinet.

### Net International Reserves (NIR) of the CBJ: definition, exclusions, valuation, and stock
- NIR (U.S. dollars) = foreign assets of the CBJ minus its foreign liabilities.
- Foreign assets (readily available claims on nonresidents in foreign convertible currencies) include: foreign exchange (cash, deposits with foreign correspondents, holdings of foreign securities), monetary gold, IMF reserve position, and SDR holdings.
- Excluded from foreign assets: assets pledged, collateralized, or otherwise encumbered; CBJ’s claims on resident banks and nonbanks; claims on subsidiaries/branches of Jordanian banks abroad; claims in foreign exchange arising from derivatives vis-à-vis domestic currency; precious metals other than gold; assets in nonconvertible currencies; illiquid swaps.
- Explicit exclusion: outstanding balance of bilateral accounts with the Central Bank of Iraq of USD 1,081.67 million is excluded from foreign assets.
- Foreign liabilities: all foreign exchange liabilities to residents and nonresidents, including commitments to sell foreign exchange arising from derivatives and Jordan’s outstanding liabilities to the IMF.
- Excluded from reserve liabilities: government foreign exchange deposits with the CBJ; deposits from public institutions and government departments with independent budgets; commercial companies with state participation; deposits from donors (including GCC grants and donor term deposits with original maturity not less than 360 days); two technical swaps with Citibank Jordan for USD 88.5 million; amounts received under any SDR allocations received after March 31, 2016.
- Valuation: stock of foreign assets and liabilities of the CBJ shall be valued at program exchange rates.
- Stock as of March 30, 2023: NIR amounted to USD 12,883.1 million (at program exchange rates).
- Adjustors to NIR floors:
  - Floors adjusted upward (downward) by the extent the sum of foreign budgetary grants and foreign budgetary loans—excluding any programmed guaranteed and non-guaranteed Eurobonds—received by the CBJ during the relevant period exceeds (falls short of) levels in Table 1 of the MEFP.
  - For the end-year floor on the NIR, the downward adjustment is capped at 75 percent of the aforementioned shortfall.
  - Floors adjusted upward by the amount the outstanding balance of bilateral accounts with the Central Bank of Iraq is repaid, including principal and interest.

### External debt service arrears: definition
- External debt service arrears: debt service payments (principal and interest) arising in respect of obligations to non-residents incurred directly or guaranteed by the central government or the CBJ that have not been made at the time due, taking into account any contractual grace periods.

### Social spending (indicative target floor): definition
- Social spending by the central government includes:
  - (i) non-wage components of education and health sectors’ current expenditure envelope, including all spending directly related to efforts to prevent, detect, control, treat and/or contain the spread of COVID-19;
  - (ii) NAF’s and other entities’ social protection programs;
  - (iii) the school feeding program.

### Public debt (indicative target ceiling): definition and adjustors
- Public debt = (i) central government direct debt (including off-budget project loans) + (ii) central government guarantees extended to NEPCO, WAJ and other public entities + (iii) stock of the CBJ’s liabilities to the IMF (excluding SDR allocations) not lent on to the central government; minus Social Security Corporation (SSC) holdings of government debt.
- Government guarantee defined as any explicit legal obligation of the central government (or agency acting on its behalf) to service such debt in the event of nonpayment, or any implicit legal or contractual obligation to finance partially or fully any shortfall incurred by the debtor.
- Adjustor: ceiling on public debt will be adjusted downward by the extent to which cumulative disbursements under the EFF during the relevant period fall short of the levels specified in Table 1.

### Domestic payment arrears ceilings: NEPCO and water sector definitions
- NEPCO domestic payment arrears: belated settlement of liabilities due under contract for more than 60 days, or creditor’s refusal to receive a duly offered settlement. Covered arrears include outstanding payments on wages and pensions; social security contributions; tax payments; obligations to banks and other private companies and suppliers. Arrears exclude obligations to the central government arising from net transfers as specified in paragraph 12.
- WAJ and Aqaba, Miyahuna, and Yarmouk distribution companies: definitions and coverage detailed in Section I (text truncated in source at this point).

*Source: Memorandum of Economic and Financial Policies and accompanying definitions (MEFP), June 12, 2023.*

### 51. Domestic payment arrears by WAJ, and Aqaba, Miyahuna, and Yarmouk Distribution

### 51. Domestic payment arrears by WAJ, and Aqaba, Miyahuna, and Yarmouk Distribution

### Definition of domestic payment arrears
- Companies are defined as the belated settlement of a debtor’s liabilities that are due under obligation (contract) for more than 60 days, or the creditor’s refusal to receive a settlement duly offered by the debtor.
- Arrears to be covered include outstanding payments on wages and pensions; social security contributions; tax payments, and obligations to banks and other private companies and suppliers.
- Arrears exclude obligations to the central government arising from net transfers as specified in paragraph 12.

### Ceiling on the Net Domestic Assets (NDA) of the CBJ
- Reserve money of the CBJ is defined as the sum of:
  - (i) currency in circulation (currency outside banks and commercial banks’ cash in vaults); and
  - (ii) non-remunerated deposits of licensed banks with the CBJ in Jordanian dinars.
- For program monitoring purposes, the net domestic assets of the CBJ are defined as the difference between the reserve money of the CBJ and its NIR as defined in Section D.

### Adjustors to the NDA ceilings
- The ceilings on the NDA 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).
  - 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.

### Data provision requirements (to IMF Division B of the Middle East and Central Asia Department)
- Related to the ceiling on the primary deficit of the central government excluding grants and net transfers to NEPCO and the state-owned water sector:
  - Standard fiscal data tables prepared by the ministry of finance covering detailed information on: revenue, including expanded information on revenues from oil derivatives, vehicles, and cigarettes, as agreed with IMF staff; expenditure; balances of government accounts with the banking system; foreign grants; domestic and external amortization and interest; net lending; debt swaps with official creditors; and monthly change in the stocks and the monthly value of stocks of uncashed checks and trust accounts.
  - Government financing information from the Treasury account, as agreed by both the Ministry of Finance and the Central Bank of Jordan, and any potential discrepancy between the government financial data and the monetary survey data (monthly).
  - Gross transfers to and from NEPCO and WAJ detailing the amounts paid or received in connection with debt transactions, transfers to cover losses, and any amount directed to repay any outstanding arrears of NEPCO or WAJ (monthly), including those to and from the relevant distribution companies.
  - Gross transfers to and from the trade account used by the Ministry of Industry and Trade for wheat and barley transactions including the sale price to mills (monthly).

- Related to central government arrears:
  - The stock of all pending bills of the central government that have not been paid for more than 60 days at the end of each quarter (quarterly), including those of the health insurance fund, to distribution electricity companies, and to the Jordan Petroleum Refinery Company.
  - The value and quantity of fuel products consumed by public sector entities from the Jordan Petroleum Refinery Company (monthly).

- Related to the combined public sector deficit:
  - All the information specified in paragraph 28.

- NEPCO reporting requirements:
  - Full unaudited income statement and the stock of accounts payable and payments overdue less and more than 60 days (quarterly) in order to compute the PC on NEPCO net loss, prepared by NEPCO’s accounting department on a quarterly basis.
  - Latest audited income statement signed by the auditor (usually available twice yearly with a six-month delay) with full explanation of any changes made to the unaudited version transmitted to the IMF, as soon as it becomes available to NEPCO’s management.

- WAJ and water distribution companies (Aqaba, Miyahuna, Yarmouk) reporting requirements:
  - Full unaudited income statement and the stock of accounts payable and payments overdue less and more than 60 days (quarterly), prepared by WAJ’s Directorate of Finance and Accounting on a quarterly basis.
  - Full unaudited income statements and the stocks of accounts payable and payments overdue less and more than 60 days (quarterly), prepared by each of the water distribution companies (Aqaba, Miyahuna, and Yarmouk) and WAJ’s Directorates of Finance on a quarterly basis.
  - Full consolidated financial balance of WAJ and the water distribution companies (Aqaba, Miyahuna, and Yarmouk) prepared by WAJ’s Directorates of Finance.
  - Breakdown of overdue payments by major creditor, and all overdue payments vis-à-vis the central government (quarterly).

- Energy and gas flow data:
  - Monthly gas flows from Egypt in million cubic meters (quarterly).
  - Monthly Liquefied Natural Gas (LNG) flows in the LNG terminal in Aqaba in million British Thermal Units and their average price, and breakdown of these flows between local use and re-exports to Egypt (quarterly).

- Related to the floor on NIR of the CBJ and ceiling on its NDA:
  - CBJ’s foreign exchange reserves and preliminary data on dollarization (weekly).
  - CBJ’s monthly FX interventions in the interbank market.
  - Data on CD auctions (following each auction).
  - Monetary statistics (monthly).
  - The outstanding balance of bilateral accounts with the Central Bank of Iraq (monthly).
  - Banking FSI (quarterly; starting 2021 Q1).

- Related to the continuous performance criteria:
  - Details of official arrears accumulated on interest and principal payments to non-resident creditors. External arrears data will be provided using actual exchange rates and on a daily basis.

- Related to the floors on public debt:
  - The fiscal tables on the central government’s domestic and external debt (monthly).
  - Tables on the stock of debt guarantees extended to NEPCO, WAJ, and other public entities (monthly).
  - Data on short-term public debt (monthly).

- Related to the floor on social spending by the central government:
  - A table on the amount of central government spending on each of the components of the social spending definition under the program (monthly).

- Other economic data submissions:
  - Interest rates and consumer prices; and exports and imports; travel receipts and tourist arrivals; remittances; outstanding balance of non-resident purchases of domestic treasury bills and bonds; and GCC grants received by the CBJ and grants transferred by the CBJ to the Ministry of Finance (monthly).
  - Balance of payments (current and capital accounts) and external debt developments (quarterly).
  - List of short-, medium- and long-term public and 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, interest rate arrangements, and the amortization profile (quarterly).
  - National accounts statistics (quarterly).

- Data submission timeframes:
  - 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 and balance of payments and external debt statistics).
  - Data related to the continuous performance criterion should be sent within one week after the date when the arrear was incurred.
  - Any revisions to previously reported data should be communicated to the staff in the context of the regular updates.

### Definitions and statistical methodology
- Any variable mentioned for the purpose of monitoring a performance criterion, and that is not explicitly defined, shall be defined in accordance with the Fund’s standard statistical methodology, such as the Government Financial Statistics.
- For variables omitted from the TMU but 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.

*Source: 51. Domestic payment arrears by WAJ, and Aqaba, Miyahuna, and Yarmouk Distribution*

---


_Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1jorea2023003.pdf_