## EXECUTIVE SUMMARY (1jorea2024002-print-pdf)

## Source details

**Canonical URL:** [EXECUTIVE SUMMARY (1jorea2024002-print-pdf)](https://www.imf.org/-/media/files/publications/cr/2024/english/1jorea2024002-print-pdf.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/cr/2024/english/1jorea2024002-print-pdf.pdf.md)
- [Structured JSON version](/-/media/files/publications/cr/2024/english/1jorea2024002-print-pdf.pdf.json)

---

### Context and near-term outlook
- Jordan’s economy showed resilience; growth reached 2.6 percent in 2023.
- Projections:
  - Growth: 2.4 percent in 2024; pickup to close to 3 percent in 2025 conditional on the conflict ending later in 2024 and its impact fading.
  - Current account deficit: narrowed to 3½ percent of GDP in 2023 (from nearly 8 percent in the previous year); projected to widen to 5 percent of GDP in 2024 as trade normalizes and imports pick up.
  - Headline inflation: 1.3 percent (y-o-y) in April 2024; projected to pick up to about 2 percent during 2024.
  - Gross usable reserves: increased to over US$17 billion by end-2023.
- Sovereign/market signals:
  - Sovereign spreads widened temporarily after October 2023 but narrowed since.
  - Moody’s upgraded Jordan's long-term sovereign credit rating from B1 to Ba3 in May 2024.
- Risks:
  - Downside: length/intensity of the Israel-Gaza conflict; trade and financial spillovers; commodity price volatility; climate-change risks (notably water scarcity); potential policy slippages around parliamentary elections in September 2024.
  - Upside: stronger-than-expected remittances, international support, faster regional stabilization, accelerated reform implementation.

### Program implementation and financing
- Program status:
  - All end-December 2023 performance criteria (PCs) were met.
  - Most indicative targets (ITs) for end-December 2023, end-January 2024, and end-March 2024 were met.
  - All six structural benchmarks (SBs) for the first review were met.
- Financing:
  - Staff supports completion of the first review and modification of the PCs for the CBJ’s net international reserves to reflect better performance.
  - Upon completion of this review, a disbursement of SDR 97.784 million will be made available to Jordan.
  - The program remains fully financed with external financing committed for the next 12 months.

### Policy stance and broad recommendations
- Fiscal policy:
  - Gradual consolidation to place public debt on a downward path, improve viability of public utilities, expand targeted support to vulnerable households, and create room for public investment.
- Monetary policy:
  - Maintain monetary and financial stability and safeguard the exchange rate peg; CBJ to continue adjusting policy rates as needed.
- Structural reforms:
  - Implement reforms to create a more dynamic private sector that generates jobs and raises living standards.
- Specific policy recommendations:
  - Continue fiscal consolidation while protecting vulnerable households.
  - Maintain monetary focus on stability; adjust policy rates as needed and monitor banks’ financial health.
  - Strengthen financial sector oversight per FSSA recommendations.
  - Gradually reduce concessionality of remaining subsidized lending and phase out the facility.
  - Continue reforms to improve business environment, competition, social safety nets, and utility financial viability.

*Source: EXECUTIVE SUMMARY (1jorea2024002-print-pdf), IMF mission discussions and staff calculations, June 13, 2024.*

---

### Monetary and financial stability

### Policy stance and CBJ targets
- CBJ commitment:
  - Continue to adjust policy rates as needed to maintain the exchange rate peg.
  - NIR targets for the rest of 2024 are revised upwards to reflect stronger outcomes through end-March and improved financing outlook.
- Recommendation: CBJ should continue to adjust policy rates as needed and ensure reserve buffers remain adequate.

### Banking system soundness — key indicators (Central Bank of Jordan data, preliminary where noted)
- Risk-weighted capital adequacy ratio: 18.3 18.3 18.0 17.3 17.4 17.9
- NPLs (In percent of total loans): 5.0 5.5 5.0 4.5 5.0 5.1
- Provisions (In percent of classified loans): 69.5 71.5 79.9 81.5 78.4 75.7
- Liquidity ratio: 134.1 136.5 141.5 138.0 135.4 142.5
- Return on assets: 1.2 0.6 1.0 1.0 1.2 1.1
- CBJ will continue close monitoring of asset quality and ensure prudent accounting, reporting, and provisioning standards.

### CBJ operations, safeguards, and AML/CFT
- CBJ is implementing recommendations of the 2023 FSSA; amendments to align asset classification with Basel Core Principles prepared for issuance by mid-June 2024 (SB for June 2024).
- CBJ developing Emergency Liquidity Assistance guidelines aiming for introduction by end-2024.
- Following removal from the FATF grey list in Fall 2023, CBJ is strengthening risk-based AML/CFT supervision and international cooperation.
- A 2024 safeguards assessment found broadly robust controls with scope to improve financial reporting; a MoU between CBJ and government on servicing financial obligations to the Fund has been signed.

### Subsidized lending facility
- CBJ is gradually phasing out the subsidized lending facility:
  - Two lending schemes expired in 2023.
  - CBJ will gradually reduce concessionality of the remaining scheme once the conflict subsides and aim to phase it out.
- Policy recommendation: Gradually reduce concessionality and phase out the facility to improve monetary policy transmission.

---

### Fiscal developments, debt, and public finances

### Recent fiscal outcomes and budget
- Central government primary deficit (excluding grants and transfers to NEPCO and WAJ): reduced to 2.7 percent of GDP in 2023 (from 3.6 percent in 2022).
- Combined public deficit target of 4.5 percent of GDP for 2023 was met.
- End-December 2023 public debt target missed by a small margin mainly due to a higher-than-expected interest bill; end-March 2024 debt target was met.
- 2024 budget (approved mid-February 2024) aims to reduce central government primary deficit (excl grants and transfers to NEPCO and WAJ) to 2.1 percent of GDP and expand the National Assistance Fund (NAF).
- Central government primary deficit target relaxed to 1.6 percent of GDP in 2025 to allow catching up on delayed capital spending.

### Debt outlook and sustainability
- General government primary surplus (including grants) projected at 1.3 percent of GDP in 2024 and 1.9 percent in 2025, up from 0.5 percent of GDP in 2023.
- Public debt assessed as sustainable and projected to fall gradually to below the target of 80 percent of GDP by 2028, assuming conflict impacts fade in 2025.

### Selected fiscal figures (from tables and text; preserved exactly)
- Central government primary balance (ex grants) levels: -1,233 -1,014 -978 -812 -812 -579 -651 -304 102 916 652
  - (in percent of GDP): -3.6 -2.8 -2.7 -2.1 -2.1 -1.4 -1.6 -0.7 0.0 0.6 1.3
- Combined public balance (1+3) levels: -1,669 -1,676 -1,622 -1,566 -1,520 -1,256 -1,250 -844 -490 -185 46
  - (in percent of GDP): -4.8 -4.6 -4.5 -4.1 -4.0 -3.1 -3.1 -2.0 -1.1 -0.4 0.1
- General government balance excluding grants (levels): -2,014 -2,100 -2,086 -2,072 -2,025 -1,845 -1,785 -1,423 -771 -331 -118
  - (in percent of GDP): -5.8 -5.8 -5.8 -5.5 -5.4 -4.6 -4.5 -3.4 -1.7 -0.7 -0.2
- Consolidated debt of general government (stocks): 30,668 32,078 32,289 33,541 33,706 34,914 35,117 36,188 36,583 36,893 37,148
  - (in percent of GDP): 88.8 88.7 89.5 88.3 89.2 87.1 88.3 86.2 82.6 78.9 75.2

---

### Utilities: Electricity (NEPCO) and Water sector financial sustainability

### NEPCO — current performance and reform measures
- NEPCO operational losses:
  - Estimated at around 1.1 percent of GDP (end-2023).
  - Projected to worsen slightly to 1.3 percent of GDP in 2024.
  - Expected to gradually reduce to 0.8 percent of GDP by 2028 under reform measures.
- Drivers of losses: sluggish electricity demand, expensive long-term off-take agreements, high guaranteed rates of return, and high financing costs.
- Arrears and financing:
  - NEPCO cleared a large part of arrears during 2023, but ITs for NEPCO’s domestic payment arrears for end-December 2023 and end-March 2024 were missed; some arrears remain.
  - Ministry of Finance’s treasury department will deduct electricity payments from spending units’ allocations to support arrears clearance.
- Reform package and SBs:
  - Cabinet adopted a plan to reduce cost of electricity generation (met SB for April 2024).
  - Levies on electricity generating companies introduced (met SB for April 2024).
  - Time-of-use tariffs effective July 1, 2024 for sectors accounting for at least 15 percent of total electricity consumption (SB for July 2024).
  - Parliament adopted legislative amendments to the Renewable Energy Law to allow net billing for new self-generators (SB for September 2024).
- NEPCO selected operational figures (preserved exactly):
  - Operating balance (QPC): -233 -400 -409 -502 -497 -428 -412 -381 -359 -360 -356
  - NEPCO Revenues (total): 1,361 1,416 1,414 1,484 1,455 1,522 1,515 1,576 1,621 1,651 1,680
  - Expenses (total): 1,594 1,815 1,823 1,986 1,952 1,979 1,957 1,987 2,011 2,042 2,065
  - Outstanding loans and bonds (stocks, end-of-period): 3,124 3,674 3,779 4,176 4,341 4,604 4,943 5,324 5,683 6,044 6,399

### Water sector — financial sustainability roadmap
- Consolidated water sector losses:
  - 0.7 percent of GDP in 2023.
  - Projected to improve to 0.6 percent of GDP in 2024 and to narrow to 0.2 percent of GDP by 2028.
- Financial Sustainability Roadmap measures:
  - Reduce non-revenue water (NRW) by at least 2 percent per year; target NRW levels of 37 percent by 2030 and 25 percent by 2040.
  - Approved multi-year path for raising water tariffs; first tariff increase effective start of 2024 aiming for recovery of operating and maintenance costs by 2030.
- Consolidated Water Sector selected figures:
  - Total Revenues (inc. Grants): 300 308 337 323 365 340 400 444 480 519 638
  - Expenditure (total): 333 364 377 377 383 385 392 405 417 429 594
  - Operating balance (QPC): -33 -56 -40 -55 -18 -45 73 96 29 14 4
  - WAJ Overall balance: -192 -257 -227 -246 -247 -247 -241 -181 -153 -133 -344

---

### External sector, reserves, and financing

### External position and reserves
- Gross usable international reserves (USD millions): 16,432 15,784 17,319 16,066 17,965 16,965 18,460 19,448 20,588 21,371 22,006
- Net international reserves (USD millions): 14,378 13,834 15,352 13,918 15,791 14,763 16,234 17,157 18,268 19,309 20,198
- Current account (percent of GDP): 2022: -7.8; 2023: -7.0; 2024: -3.5; 2025: -6.3; 2026: -5.0; 2027: -4.5; 2028: -4.0; 2029: -3.9; 2030: -3.9; 2031: -4.1; 2032: -4.0

### Balance of payments and trade (selected)
- Current account (levels, USD millions): -3,820 -3,577 -1,761 -3,396 -2,657 -2,546 -2,217 -2,322 -2,451 -2,737 -2,793
- Trade balance (levels, USD millions): -11,578 -10,810 -10,307 -10,130 -10,208 -10,097 -10,674 -11,599 -12,587 -13,185 -13,731
- Exports f.o.b. (USD millions): 12,798 12,497 12,608 12,696 12,103 13,132 12,578 13,126 13,710 14,419 15,268
- Imports f.o.b. (USD millions): 24,376 23,307 22,915 22,826 22,311 23,229 23,252 24,726 26,297 27,604 28,999
- Tourism (travel receipts, USD millions): 5,816 6,812 7,410 6,655 7,207 7,380 8,031 8,573 9,154 9,744 10,332

### External financing needs and sources (selected)
- Gross financing requirements (USD millions): 7,826 6,903 4,515 5,746 5,316 6,652 5,927 6,018 6,061 5,941 4,958
- Gross financing sources (identified) (USD millions): 4,345 4,746 4,158 4,125 3,063 5,864 4,250 5,312 5,787 6,379 5,593
  - FDI, net: 1,269 1,261 780 1,499 770 1,931 1,014 1,473 1,958 2,346 2,606
  - Public grants: 1,861 1,640 1,624 1,619 1,595 1,453 1,389 1,468 1,378 1,242 1,242

### IMF EFF access and phasing
- Board approval of EFF (January 10, 2024): 144.102 SDR million (42.0 percent of quota)
- Scheduled purchases by review (SDR million, percent of quota): First Review (April 1, 2024) 97.78 (28.5); Second Review (October 1, 2024) 97.78 (28.5); Third Review (April 1, 2025) 97.78 (28.5); Fourth Review (October 1, 2025) 97.78 (28.5); Fifth Review (April 1, 2026) 97.78 (28.5); Sixth Review (October 1, 2026) 97.78 (28.5); Seventh Review (April 1, 2027) 97.78 (28.5); Eight Review (October 1, 2027) 97.78 (28.5)
- Total: 926.37 SDR million (270.0 percent of quota)
- Note: Jordan's quota is SDR 343.1 million.

---

### Structural reforms and inclusion

### Progress to date (selected SBs met)
- Digital track-and-trace system for alcohol introduced (SB met March 2024).
- Qualification and merit-based hiring/promotion for senior civil service positions implemented via Public Service and Administration Commission (SB met March 2024).
- Cabinet adopted plan to reduce electricity generation costs and introduced levies on generating companies (SBs met April 2024).
- Time-of-use tariffs to apply to sectors accounting for at least 15 percent of electricity consumption effective July 1, 2024 (SB for July 2024).
- Parliament adopted amendments to Renewable Energy Law to allow net billing for new self-generators (SB for September 2024).
- Submitted legislation to abolish redundant licenses in tourism (SB met March 2024).
- Request to Special Bureau for Interpretation of Companies Law provisions (SB met May 2024).

### Planned structural benchmarks (selected future SBs and due dates, preserved exactly)
- Align CBJ prudential asset classification with Basel Core Principles. June 2024.
- Apply time-of-use tariffs to capture at least 15 percent of consumption. July 2024.
- ISTD and Customs data sharing agreement. September 2024.
- Introduce economically efficient tariff design (net billing) for new self-generators. September 2024.
- Implement performance-based salary mechanism for Category 1 civil service employees. December 2024.
- ISTD to mandate e-invoices for 100 percent of sales transactions. March 2025.
- Submit amendments to labor and social security laws to parliament. September 2025.
- CBJ to align prudential requirements for concentration risk and related party exposure with Basel Core Principles. November 2026.

### Structural policy priorities
- Enhance business environment, strengthen competition, attract investment, reform labor markets to increase flexibility and female participation while preserving worker protections.
- Continue digitalization of government services including tax and customs administration.
- Policy recommendation: Continue structural reforms to improve private-sector dynamism, create jobs, and strengthen social safety nets.

---

### Risk Assessment Matrix — key risks and policy responses

### Global risks (likelihood and impact as summarized)
- Intensification of regional conflicts: Likelihood: High; Economic Impact: High.
  - Responses: Targeted fiscal measures; strengthen social safety nets.
- Commodity price volatility: Likelihood: High; Economic Impact: High.
  - Responses: Targeted support to vulnerable households; strengthen safety nets.
- Abrupt global slowdown: Likelihood: Medium; Economic Impact: High.
  - Responses: CBJ to follow Fed conditional on domestic conditions; monitor banks’ buffers; accelerate structural reforms.
- Monetary policy miscalibration: Likelihood: Medium; Economic Impact: Medium.
  - Responses: CBJ to follow Fed conditional on domestic conditions; targeted support; monitor buffers.
- Systemic financial instability: Likelihood: Medium; Economic Impact: Medium.
  - Responses: Monitor banks’ buffers; implement FSSA recommendations.
- Sovereign debt distress: Likelihood: Medium; Economic Impact: High.
  - Responses: Maintain prudent macro policies; continue fiscal consolidation; consider capital flow measures if disorderly.
- Deepening geoeconomic fragmentation: Likelihood: High; Economic Impact: Medium.
  - Responses: Accelerate structural reforms for diversification and private sector development.

### Domestic risks (selected)
- Increase in water scarcity due to climate change: Likelihood: Medium; Economic Impact: High.
  - Responses: Prioritize sustainable water supplies; improve water sector efficiency and financial sustainability.
- Persistently high unemployment: Likelihood: Medium; Economic Impact: High.
  - Responses: Accelerate reforms to promote private-sector job creation; strengthen social safety nets.

---

### Staff recommendation and program monitoring

### Staff recommendation
- Staff supports the authorities’ request for completion of the first review under the extended arrangement.
- Staff supports proposed modification of end-June and end-December 2024 performance criteria on the CBJ’s net international reserves to reflect stronger outcomes while leaving room to act amid uncertainty.
- Upon completion of the first review, a purchase of SDR 97.784 million is available to Jordan.

### Program monitoring and next steps
- Implementation monitored through semi-annual quantitative performance criteria, structural benchmarks, and quarterly indicative targets.
- Expected timing: second review on or after October 1, 2024; third review on or after April 1, 2025.
- Government authorizes publication of the Letter of Intent, its attachments, and accompanying staff report.

*Source: IMF staff report excerpt (1jorea2024002-print-pdf).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context and outlook
- Jordan’s economy continues to show resilience despite a challenging external environment.
- Growth reached 2.6 percent in 2023.
- Growth is projected to moderate to 2.4 percent in 2024, reflecting the continuation of the Israel-Gaza conflict and trade route disruptions, with a pickup to close to 3 percent in 2025 contingent upon the conflict ending later in 2024 and its impact fading.
- The current account deficit narrowed to 3½ percent of GDP in 2023 (from nearly 8 percent of GDP in the previous year) but is projected to widen to 5 percent of GDP in 2024 as trade normalizes and imports pick up.
- Headline inflation stood at 1.3 percent (y-o-y) in April 2024 and is projected to pick up to about 2 percent during the year.
- Gross usable reserves increased to over US$17 billion by end-2023.
- Sovereign spreads widened temporarily after October 2023 but have narrowed since; Moody’s upgraded Jordan's long-term sovereign credit rating in local and foreign currencies from B1 to Ba3 in May 2024.
- Risks are tilted to the downside: the length and intensity of the Israel-Gaza conflict, wider spillovers through trade and financial channels, commodity price volatility, climate-change risks (notably water scarcity), and potential policy slippages around the parliamentary elections planned for September 2024. Upside risks include stronger-than-expected remittance receipts, international support, faster regional stabilization, and accelerated reform implementation.

### Program implementation
- The program is off to a good start with strong authorities’ ownership.
- All end-December 2023 performance criteria (PCs) were met.
- Most indicative targets (ITs) for end-December 2023, end-January 2024, and end-March 2024 were met.
- Fiscal and monetary policies remain on track; financial performance of utility companies appears on track.
- All six structural benchmarks (SBs) for the first review were met, with good progress toward SBs for the next review.

### Policies
- Authorities remain committed to sound macroeconomic policies and structural reforms to maintain macro stability, strengthen resilience, and foster stronger, job-rich growth.
- Fiscal policy: gradual consolidation, improving viability of public utilities, placing public debt on a downward path, expanding targeted support to vulnerable households, and creating room for public investment.
- Monetary policy: maintain monetary and financial stability and safeguard the exchange rate peg.
- Structural reforms: steadfast implementation to create a more dynamic private sector that can generate jobs and raise living standards.

### First review and financing
- Given satisfactory performance and strong authorities’ commitment, staff supports the request for completion of the first review and modification of the PCs for the Central Bank of Jordan’s (CBJ) net international reserves to reflect better performance so far.
- Upon completion of this review, a disbursement of SDR 97.784 million will be made available to Jordan.

### Recent fiscal and debt developments
- Central government primary deficit (excluding grants and transfers to NEPCO and WAJ) reduced to 2.7 percent of GDP in 2023, from 3.6 percent of GDP in 2022.
- Combined public deficit target of 4.5 percent of GDP for 2023 was met.
- End-December 2023 public debt target was missed by a small margin mainly due to a higher-than-expected interest bill; end-March 2024 debt target was met.
- 2024 budget approved mid-February 2024 aims to reduce the central government primary deficit (excluding grants and transfers to NEPCO and WAJ) to 2.1 percent of GDP through revenue measures and improved tax administration while expanding the National Assistance Fund (NAF).
- Combined public deficit projected to decline to 3.1 percent of GDP in 2025; central government primary deficit target relaxed to 1.6 percent of GDP in 2025 to allow catching up on delayed capital spending.
- General government primary surplus projected at 1.3 percent of GDP in 2024 and 1.9 percent of GDP in 2025, up from 0.5 percent of GDP in 2023.
- Public debt is assessed as sustainable, and public debt-to-GDP is projected to gradually fall to below the target of 80 percent of GDP by 2028, assuming the impact of the conflict and trade disruptions fades in 2025.

### Fiscal structural reform progress
- Digital track-and-trace system for alcohol introduced (met SB for March 2024).
- Qualification and merit-based hiring and promotions for the civil service implemented starting with senior positions via the Public Service and Administration Commission (met SB for March 2024).
- Steps taken to ensure health exemptions are well-targeted and do not exceed budget allocations; treasury department deducts electricity payments from spending units’ budgetary allocations to avoid arrears.

### Monetary and financial stability
- The CBJ has maintained monetary and financial stability; the peg to the U.S. dollar, supported by sizable international reserves, remains an effective nominal anchor.
- End-January and end-March 2024 net international reserves (NIR) and net domestic assets targets were met by considerable margins.
- Private sector credit growth slowed from about 8 percent (y-o-y) at the start of 2023 to below 2 percent by end-2023 amid higher policy rates and borrowing costs.

*Source: EXECUTIVE SUMMARY (1jorea2024002-print-pdf), IMF mission discussions and staff calculations, June 13, 2024.*

### 12. The CBJ remains committed to make the necessary policy adjustments to safeguard

### 12. The CBJ remains committed to make the necessary policy adjustments to safeguard monetary and financial stability.

### Monetary and financial stability: policy stance and targets
- The CBJ stressed it will continue to adjust its policy rates as needed to maintain the exchange rate peg.
- NIR targets for the rest of 2024 are revised upwards to reflect the stronger outcomes through end-March and the improved financing outlook, while leaving room to deal with the high level of uncertainty.
- Policy recommendation: The CBJ should continue to adjust its policy rates as needed to support the exchange rate peg and ensure that reserve buffers remain adequate.

### Banking system soundness
- The banking system’s capital adequacy ratio remains well above the regulatory minimum of 12 percent.
- Non-performing loan (NPL) ratios remain broadly stable and relatively low, albeit with a slight uptick in 2023, reflecting the slowdown in economic activity; provisioning is high.
- Key indicators (Central Bank of Jordan data, preliminary where noted):
  - Risk-weighted capital adequacy ratio: 18.3 18.3 18.0 17.3 17.4 17.9
  - NPLs (In percent of total loans): 5.0 5.5 5.0 4.5 5.0 5.1
  - Provisions (In percent of classified loans): 69.5 71.5 79.9 81.5 78.4 75.7
  - Liquidity ratio: 134.1 136.5 141.5 138.0 135.4 142.5
  - Return on assets: 1.2 0.6 1.0 1.0 1.2 1.1
- The CBJ will continue close monitoring of banks’ asset quality, including ensuring sustained application of prudent accounting, reporting, and provisioning standards.

### CBJ operations, supervision, and safeguards
- The CBJ remains on track to implement the recommendations of the 2023 Financial System Stability Assessment (FSSA).
- Amendments to align prudential regulations regarding asset classification with the Basel Core Principles have been prepared and are planned to be issued by mid-June 2024 (SB for June 2024).
- The CBJ is working toward implementing the safeguards assessment recommendations in accordance with its legal framework.
- The CBJ is developing guidelines and instructions for Emergency Liquidity Assistance, aiming to introduce them by end-2024.
- AML/CFT efforts: Following Jordan’s removal from the FATF grey list in the Fall of 2023, the CBJ is enhancing the effectiveness of the framework, including strengthening risk-based AML/CFT supervision and increasing international cooperation.
- A 2024 update safeguards assessment found broadly robust controls and sound assurance functions; scope exists for improving financial reporting. A framework agreement (MoU) between the CBJ and the government on respective responsibilities for servicing respective financial obligations to the Fund has been signed.

### Subsidized lending facility
- The CBJ is gradually phasing out its subsidized lending facility.
- Two lending schemes expired in 2023.
- The CBJ will gradually reduce the concessionality of its remaining scheme once the conflict subsides, with a view to phasing it out, as it complicates monetary policy transmission.
- Policy recommendation: Gradually reduce the concessionality of remaining subsidized lending and phase out the facility to improve monetary policy transmission.

### Improving financial sustainability in the electricity sector (NEPCO)
- NEPCO operational losses in 2023 were contained and estimated at around 1.1 percent of GDP (end-2023).
- NEPCO losses are projected to worsen slightly to 1.3 percent in 2024 due to:
  - Sluggish electricity demand from weaker activity and households shifting to renewable energy;
  - Long-term contractual obligations to generation and distribution companies (expensive off-take agreements and high guaranteed rates of return);
  - High financing costs.
- NEPCO made progress clearing a large part of its stock of arrears during 2023, but ITs for NEPCO’s domestic payment arrears for both end-December 2023 and end-March 2024 were missed and some arrears remain; these are targeted to be gradually cleared in the period ahead with ITs adjusted to reflect this.
- The Ministry of Finance’s treasury department will henceforth pay spending units’ electricity bills directly to support arrears clearance.
- Reform package and targets:
  - Cabinet adopted a plan to reduce the cost of electricity generation, focusing on renegotiation of power purchasing agreements (met SB for April 2024).
  - Government introduced legally and regulatory permissible levies on electricity generating companies (met SB for April 2024).
  - Authorities completed consultative processes and decided to introduce, effective July 1, 2024, time-of-use tariffs for sectors accounting for at least 15 percent of total electricity consumption (SB for July 2024).
  - Parliament has adopted necessary legislative amendments to the Renewable Energy Law to allow net billing for new self-generators (SB for September 2024).
- Outlook: Reform measures are expected to improve NEPCO’s efficiency and gradually reduce its losses to 0.8 percent of GDP by 2028.

### Improving financial sustainability in the water sector
- Consolidated water sector losses in 2023 amounted to 0.7 percent of GDP.
- Consolidated water sector losses are projected to improve slightly to 0.6 percent of GDP in 2024, and to narrow further to 0.2 percent of GDP by 2028.
- Measures under the Financial Sustainability Roadmap (FSR):
  - Reduce non-revenue water (NRW) by at least 2 percent per year, targeting NRW levels of 37 percent by 2030 and 25 percent by 2040.
  - Approved multi-year path for raising water tariffs; first tariff increase came into effect at the start of 2024, aiming to ensure recovery of operating and maintenance costs by 2030.
- Arrears: A large part of sector arrears was cleared in 2023, but some new arrears emerged in early 2024 and ITs for end-December 2023 and end-March 2024 were missed; these arrears are expected to be cleared in the period ahead with ITs adjusted.

### Structural reforms to support inclusive growth
- Reform focus: enhance the business environment, strengthen competition, attract higher levels of investment, and reform labor markets to enhance flexibility, encourage formal employment including of women, while providing worker protections and harmonizing rights of male and female workers.
- Recent measures:
  - Submitted legislation to parliament to abolish redundant licenses in the tourism sector (met SB for March 2024).
  - Filed a request to the Special Bureau for Interpreting Laws to clarify provisions in the Companies Law regarding personal liability of partners in limited liability companies (met SB for May 2024).
  - Progress continues in digitalization of government services, including tax and customs administration.
- Preparatory work underway to amend labor, social security, and competition laws, with a view to submitting amendments to parliament in the course of 2025 (SBs for September 2025) to enhance labor market flexibility, female labor participation, and competition.
- Policy recommendation: Continue structural reforms to improve the business environment, enhance competition, strengthen social safety nets, and support private-sector job creation.

### Program modalities, external financing, and capacity to repay
- Against strong performance, most program targets remain appropriate; fiscal and monetary policies appear on track to meet 2024 targets.
- The performance criteria for the CBJ’s net international reserves are proposed to be modified upward to reflect stronger performance and improved financing outlook.
- The program remains fully financed. External financing from international partners is firmly committed for the next 12 months, with good prospects for the remainder of the program, including financing from the World Bank, the EU, and bilateral donors (France, Germany, Japan, Qatar, the U.S., among others).
- Jordan continues to have access to international capital markets with relatively low sovereign spreads.
- Purchases under the EFF arrangement will cover the remaining balance of payments needs and will continue to be used for budget financing.
- Jordan’s capacity to repay the Fund remains adequate; risks include deterioration in the external environment, political challenges to key reform measures, and administrative capacity constraints.
- Fund exposure projections:
  - Outstanding Fund credit peaking at 3.9 percent of GDP and 9.4 percent of exports of goods and services in 2024, and 480 percent of quota in 2027, before gradually declining.
- Risks mitigants: strong track record of sound policies and substantial capacity development activities strengthening key institutions (Ministry of Finance, the CBJ, the Income and Sales Tax Department, and the Department of Statistics).

### Staff appraisal: overall assessment and priorities
- Jordan’s economy continues to show resilience despite a challenging external environment: growth continues albeit at a somewhat slower pace, inflation is low, reserve buffers are strong, and sovereign spreads have narrowed.
- Remaining challenges: weak job creation, high unemployment, and a near-term outlook weighed by the unsettled regional situation; strong international support remains needed to assist policy efforts and help shoulder the cost of hosting a large number of Syrian refugees.
- The EFF-supported program is off to a good start: all PCs and SBs, and most ITs for this review were met, with steady progress toward benchmarks for the next review.
- Key priorities and recommendations:
  - Stay the course with gradual fiscal consolidation to place public debt on a downward path while ensuring support for vulnerable households.
  - Maintain monetary policy focus on safeguarding monetary and financial stability; continue adjusting policy rates as needed and closely monitor banks’ financial health.
  - Further strengthen financial sector oversight in line with FSSA recommendations.
  - Gradually reduce the concessionality of remaining subsidized lending schemes.
  - Continue structural reforms to boost private-sector dynamism, create jobs, improve the business environment, enhance competition, and strengthen social safety nets.
  - Continue efforts to improve financial viability of utility companies to reduce their burden on public finances while enhancing service delivery.

*Source: IMF staff report excerpt.*

### 31. Staff supports the authorities’ request for the completion of the first review under

### 1jorea2024002-print-pdf - 31. Staff supports the authorities’ request for the completion of the first review under

### Staff recommendation
- Staff supports the authorities’ request for the completion of the first review under the extended arrangement.
- Staff supports the proposed modification of the end-June and end-December 2024 performance criteria on the CBJ’s net international reserves to reflect stronger outcomes and improved financing outlook, while leaving room to act in an uncertain environment.

### Real sector developments
- GDP is well above pre-pandemic levels, with notable growth in: agriculture; construction; and retail, restaurants, and hotels.
- Sectors contributing most to growth in 2023 Q4: manufacturing, financial services, and personal services.
- Inflation is relatively stable at around 2 percent.
- Inflation is driven mainly by rent and clothing.
- Labor market:
  - Youth unemployment has dropped in the last quarter of 2023.
  - Female labor force participation is trending slightly upwards.
  - Employment recovery has been heterogeneous across sectors.

### Fiscal developments
- Revenues have been recovering from the pandemic; tax revenues saw a strong rebound in 2022 and 2023, mainly driven by income and profit taxes.
- Government expenditures are almost flat.
- Public debt is projected to gradually decline, to just under 80 percent of GDP by 2028.
- Despite spending pressures, the primary balance is projected to deliver the desired consolidation.

Key charted/factual highlights (selected figures shown in source):
- General Government Debt (Percent of GDP, net of SSC's holdings) trajectory showing decline to just under 80 percent by 2028 as projected in figure context.
- Primary Government Balance (Excl grants and transfers to NEPCO and WAJ, percent of GDP) projected improvement consistent with consolidation narrative.

### External sector developments
- The peg and monetary tightening contributed to an appreciation of the real effective exchange rate.
- Growth slowdown and trade disruptions narrowed the current account deficit in 2023.
- Fertilizer exports slowed after the surge in 2022-23, mainly due to lower prices.
- Exports to GCC countries grew, marking deeper regional integration.
- Tourism receipts in 2023 surpassed pre-pandemic levels, but non-Arab tourist arrivals declined since the start of the Israel-Gaza conflict.
- Import growth slowed following the post-pandemic surge in prices, with fuel playing a key role.

### Monetary and financial indicators
- Policy rates were raised in line with those of the U.S. Federal Reserve.
- Deposit and lending rates have also increased, albeit more slowly.
- Banks’ liquidity conditions remain comfortable.
- Private sector credit growth has slowed sharply in recent months.
- CBJ’s subsidized lending schemes remain stable.
- Ample reserves continue to keep dollarization low.

Representative series and indicators (as presented):
- Interest Rates (In percent) series included: Re-Discount Rate; Overnight deposit; Main policy rate (one-week repo); Federal Funds Rate; Interbank rate; Overnight repo.
- Banks' JD Liquidity (Billions): listed series include Excess reserves deposited at CBJ, Deposits at CBJ's overnight facility, CDs issued by CBJ, Total JD liquidity.
- Domestic Credit of the Banking System: private sector credit growth (y-o-y) and related series.
- Reserves and Dollarization: Deposit dollarization (In percent) and NIR ($bn, RHS).

### Macroeconomic outlook and key indicators (Table 1: Selected Economic Indicators and Macroeconomic Outlook, 2022–29)
- Real GDP at market prices: 2022: 2.4; 2023: 2.6; 2024 (Act./EFF Request): 2.6; 2024 (Prel. EFF Request/Proj.): 2.6; 2025: 2.4; 2026: 3.0; 2027: 2.9; 2028: 3.0; 2029: 3.0.
- GDP deflator at market prices: 2022: 2.6; 2023: 2.0; 2024: 1.8; 2025: 2.4; 2026: 2.3; 2027: 2.5; 2028: 2.3; 2029: 2.5.
- Nominal GDP at market prices (JD billions): 2022: 34.5; 2023: 36.2; 2024: 36.1; 2025: 38.0; 2026: 37.8; 2027: 40.1; 2028: 39.8; 2029: 42.0; 2030: 44.3; 2031: 46.8; 2032: 49.4 (table spans 2022–29 in source).
- Nominal GDP at market prices ($ billions): 2022: 48.7; 2023: 51.0; 2024: 50.9; 2025: 53.6; 2026: 53.3; 2027: 56.6; 2028: 56.1; 2029: 59.2; 2030: 62.5; 2031: 66.0; 2032: 69.6.
- Consumer price inflation (annual average): 2022: 4.2; 2023: 2.2; 2024: 2.1; 2025: 2.7; 2026: 2.1; 2027: 2.4; 2028: 2.4; 2029: 2.5.
- Consumer price inflation (end of period): 2022: 4.4; 2023: 2.0; 2024: 1.6; 2025: 2.7; 2026: 2.3; 2027: 2.4; 2028: 2.4; 2029: 2.5.
- Unemployment rate (period average, percent) reporting change in methodology noted: 1/ The Department of Statistics changed the methodology of the Survey of Employment and Unemployment in 2017 (reports unemployment rates for Jordanians only).
- Revenue and grants (percent of GDP): 2022: 25.8; 2023: 26.2; 2024: 25.3; 2025: 26.8; 2026: 26.0; 2027: 27.1.
- Expenditure (percent of GDP): 2022: 31.6; 2023: 31.5; 2024: 30.5; 2025: 32.4; 2026: 31.5; 2027: 32.3.
- Overall central government balance (percent of GDP): 2022: -5.8; 2023: -5.3; 2024: -5.2; 2025: -5.5; 2026: -5.6; 2027: -5.2; 2028: -5.5; 2029: -4.7; 2030: -3.2; 2031: -2.3; 2032: -1.4.
- Primary government balance (excluding grants) (percent of GDP): 2022: -3.6; 2023: -2.8; 2024: -2.7; 2025: -2.1; 2026: -2.1; 2027: -1.4; 2028: -1.6; 2029: -0.7; 2030: 0.0; 2031: 0.6; 2032: 1.3.
- Government and guaranteed gross debt (percent of GDP): 2022: 111.3; 2023: 111.5; 2024: 114.1; 2025: 112.7; 2026: 113.7; 2027: 112.9; 2028: 114.3; 2029: 113.7; 2030: 111.3; 2031: 108.8; 2032: 105.8.
- Government and guaranteed gross debt, net of SSC's holdings (percent of GDP): 2022: 88.8; 2023: 88.7; 2024: 89.5; 2025: 88.3; 2026: 89.2; 2027: 87.1; 2028: 88.3; 2029: 86.2; 2030: 82.6; 2031: 78.9; 2032: 75.2.
- Current account balance (including grants), of which (percent of GDP unless otherwise noted): 2022: -7.8; 2023: -7.0; 2024: -3.5; 2025: -6.3; 2026: -5.0; 2027: -4.5; 2028: -4.0; 2029: -3.9; 2030: -3.9; 2031: -4.1; 2032: -4.0.
- Exports of goods, f.o.b. ($ billions): 2022: 12.8; 2023: 12.5; 2024: 12.6; 2025: 12.7; 2026: 12.1; 2027: 13.1; 2028: 12.6; 2029: 13.1; 2030: 13.7; 2031: 14.4; 2032: 15.3.
- Imports of goods, f.o.b. ($ billions): 2022: 24.4; 2023: 23.3; 2024: 22.9; 2025: 22.8; 2026: 22.3; 2027: 23.2; 2028: 23.3; 2029: 24.7; 2030: 26.3; 2031: 27.6; 2032: 29.0.
- Gross usable international reserves ($ millions): 2022: 16,432; 2023: 15,784; 2024: 17,319; 2025: 16,066; 2026: 17,965; 2027: 16,965; 2028: 18,460; 2029: 19,448; 2030: 20,588; 2031: 21,371; 2032: 22,006.
- Net international reserves ($ millions): 2022: 14,378; 2023: 13,834; 2024: 15,352; 2025: 13,918; 2026: 15,791; 2027: 14,763; 2028: 16,234; 2029: 17,157; 2030: 18,268; 2031: 19,309; 2032: 20,198.
- Population (millions): 2022–2024: 11.3; 2025: 11.4; 2026: 11.4; 2027: 11.4; 2028: 11.6; 2029: 11.7; 2030: 11.8; 2031: 11.9.
- Nominal per capita GDP ($): 2022: 4,317; 2023: 4,498; 2024: 4,488; 2025: 4,705; 2026: 4,682; 2027: 4,943; 2028: 4,904; 2029: 5,100; 2030: 5,339; 2031: 5,584; 2032: 5,836.
- U.S. dollar per Jordanian dinar (period average): 1.41 (for all years listed).
- Real effective exchange rate (end of period, 2010=100) and percent change noted with CBJ staff remark on more moderate appreciation.

### Central government fiscal operations (Tables 2a, 2b, 2c — selected figures)
- Total revenue and grants (JD millions): 2022: 8,914; 2023: 9,468; 2024: 9,144; 2025: 10,192; 2026: 9,813; 2027: 10,879; 2028: 10,457; 2029: 11,205; 2030: 11,988; 2031: 12,677; 2032: 13,400.
- Domestic revenue (JD millions): 2022: 8,122; 2023: 8,719; 2024: 8,432; 2025: 9,485; 2026: 9,106; 2027: 10,218; 2028: 9,841; 2029: 10,533; 2030: 11,299; 2031: 11,950; 2032: 12,633.
- Tax revenue (JD millions): 2022: 6,048; 2023: 6,589; 2024: 6,184; 2025: 7,168; 2026: 6,816; 2027: 7,752; 2028: 7,410; 2029: 7,945; 2030: 8,533; 2031: 9,033; 2032: 9,555.
  - Taxes on income and profits (JD millions): 2022: 1,548; 2023: 1,760; 2024: 1,773; 2025: 1,950; 2026: 1,908; 2027: 2,091; 2028: 2,041; 2029: 2,192; 2030: 2,359; 2031: 2,495; 2032: 2,633.
  - Sales taxes (JD millions): 2022: 4,168; 2023: 4,450; 2024: 4,068; 2025: 4,758; 2026: 4,503; 2027: 5,106; 2028: 4,862; 2029: 5,147; 2030: 5,468; 2031: 5,790; 2032: 6,132.
- Total expenditures, inc. other use of cash (JD millions): 2022: 10,914; 2023: 11,393; 2024: 11,004; 2025: 12,292; 2026: 11,912; 2027: 12,957; 2028: 12,651; 2029: 13,166; 2030: 13,400; 2031: 13,756; 2032: 14,085.
- Current expenditure (JD millions): 2022: 9,752; 2023: 9,791; 2024: 9,627; 2025: 10,594; 2026: 10,304; 2027: 11,111; 2028: 10,778; 2029: 11,202; 2030: 11,306; 2031: 11,563; 2032: 11,782.
- Wages and salaries (JD millions): 2022: 1,849; 2023: 1,981; 2024: 1,953; 2025: 2,090; 2026: 2,090; 2027: 2,144; 2028: 2,145; 2029: 2,241; 2030: 2,309; 2031: 2,424; 2032: 2,545.
- Interest payments (JD millions): 2022: 1,477; 2023: 1,659; 2024: 1,703; 2025: 1,995; 2026: 1,995; 2027: 2,160; 2028: 2,160; 2029: 2,330; 2030: 2,111; 2031: 2,097; 2032: 2,104.
  - Domestic interest (JD millions): 2022: 979; 2023: 1,024; 2024: 1,068; 2025: 1,195; 2026: 1,195; 2027: 1,214; 2028: 1,214; 2029: 1,283; 2030: 1,471; 2031: 1,559; 2032: 1,652.
  - External interest (JD millions): 2022: 498; 2023: 635; 2024: 635; 2025: 800; 2026: 800; 2027: 946; 2028: 946; 2029: 1,047; 2030: 641; 2031: 538; 2032: 452.
- Capital expenditure (JD millions): 2022: 1,162; 2023: 1,601; 2024: 1,378; 2025: 1,698; 2026: 1,608; 2027: 1,846; 2028: 1,873; 2029: 1,964; 2030: 2,094; 2031: 2,193; 2032: 2,303.
- Total balance from above the line (JD millions): 2022: -2,000; 2023: -1,925; 2024: -1,860; 2025: -2,100; 2026: -2,099; 2027: -2,078; 2028: -2,194; 2029: -1,961; 2030: -1,412; 2031: -1,079; 2032: -686.
- Financing (JD millions): 2022: 2,204; 2023: 1,925; 2024: 1,877; 2025: 2,100; 2026: 2,099; 2027: 2,078; 2028: 2,194; 2029: 1,961; 2030: 1,412; 2031: 1,079; 2032: 686.
  - Foreign financing (net) (JD millions): 2022: 1,588; 2023: 982; 2024: 1,225; 2025: 1,195; 2026: 1,540; 2027: 904; 2028: 1,071; 2029: 434; 2030: 258; 2031: 73; 2032: -325.
  - Domestic financing (net) (JD millions): 2022: 616; 2023: 943; 2024: 651; 2025: 905; 2026: 559; 2027: 1,174; 2028: 1,124; 2029: 1,527; 2030: 1,154; 2031: 1,006; 2032: 1,011.
- Memorandum: NEPCO operating balance (JD millions): 2022: -233; 2023: -400; 2024: -409; 2025: -502; 2026: -497; 2027: -428; 2028: -412; 2029: -381; 2030: -359; 2031: -360; 2032: -356.

*Sources: Jordanian authorities; Haver Analytics; Central Bank of Jordan; Jordan Department of Statistics; and IMF staff calculations and estimates.*

### 1. Central government primary balance (ex grants)-1,233-1,014-978-812-812-579-651-30410291652

### 1. Central government primary balance (ex grants)

### Central government primary balance (ex grants)
- Levels: -1,233 -1,014 -978 -812 -812 -579 -651 -304 102 916 652
- (in percent of GDP): -3.6 -2.8 -2.7 -2.1 -2.1 -1.4 -1.6 -0.7 0.0 0.6 1.3

### Central government primary balance (inc grants)
- Levels: -440.3 -266.0 -266.4 -104.8 -104.3 82.2 -34.5 368.7 699.4 1,018.1 1,418.9
- (in percent of GDP): -1.3 -0.7 -0.7 -0.3 -0.3 0.2 -0.1 0.9 1.6 2.2 2.9

### Balance of utilities (NEPCO, WAJ, water distribution companies)
- Levels: -436 -662 -644 -754 -708 -677 -599 -541 -500 -476 -606
- (in percent of GDP): -1.3 -1.8 -1.8 -2.0 -1.9 -1.7 -1.5 -1.3 -1.1 -1.0 -1.2

### Combined public balance (1+3)
- Levels: -1,669 -1,676 -1,622 -1,566 -1,520 -1,256 -1,250 -844 -490 -185 46
- (in percent of GDP): -4.8 -4.6 -4.5 -4.1 -4.0 -3.1 -3.1 -2.0 -1.1 -0.4 0.1

### SSC balance
- Levels: 882 903 904 1,076 1,076 1,101 1,101 1,146 1,148 1,186 1,236
- (in percent of GDP): 2.6 2.5 2.5 2.8 2.8 2.7 2.8 2.7 2.6 2.5 2.5

### General government primary balance (ex grants) (4+5)
- Levels: -642 -583 -532 -251 -203 120 127 605 988 1,354 1,657
- (in percent of GDP): -1.9 -1.6 -1.5 -0.7 -0.5 0.3 0.3 1.4 2.2 2.9 3.4

### General government primary balance (inc grants)
- Levels: 150.5 165.6 179.3 456.5 504.5 781.3 743.3 1,277.3 1,676.8 2,081.1 2,423.8
- (in percent of GDP): 0.4 0.5 0.5 1.2 1.3 1.9 1.9 3.0 3.8 4.4 4.9

### General government overall balance
- Levels: -1,184 -1,317.0 -1,344 -1,334 -1,287 -1,154 -1,192 -796 -141 317 699
- (in percent of GDP): -3.4 -3.6 -3.7 -3.5 -3.4 -2.9 -3.0 -1.9 -0.3 0.7 1.4

*Source: 1jorea2024002-print-pdf - 1. Central government primary balance (ex grants)-1,233-1,014-978-812-812-579-651-30410291652*

### 9. General government balance excluding grants -2,014-2,100    -2,086-2,072-2,025-1,845-1,785    -1,423-771-331-118

### 9. General government balance excluding grants -2,014-2,100 -2,086-2,072-2,025-1,845-1,785 -1,423-771-331-118

### Fiscal position: general government balance and debt
- General government balance excluding grants (levels): -2,014 -2,100 -2,086 -2,072 -2,025 -1,845 -1,785 -1,423 -771 -331 -118
- General government balance excluding grants (in percent of GDP): -5.8 -5.8 -5.8 -5.5 -5.4 -4.6 -4.5 -3.4 -1.7 -0.7 -0.2
- Consolidated debt of general government (stocks): 30,668 32,078 32,289 33,541 33,706 34,914 35,117 36,188 36,583 36,893 37,148
- Consolidated debt of general government (in percent of GDP): 88.8 88.7 89.5 88.3 89.2 87.1 88.3 86.2 82.6 78.9 75.2
- Unconsolidated debt of general government (stocks): 38,490 40,301 41,181 42,813 42,978 45,286 45,490 47,710 49,305 50,865 52,220
- Unconsolidated debt of general government (in percent of GDP): 111.4 111.5 114.1 112.7 113.7 112.9 114.3 113.7 111.3 108.8 105.8
- Nominal GDP at market prices (levels): 34,544 36,151 36,078 37,981 37,793 40,098 39,784 41,961 44,300 46,770 49,377

### Memorandum fiscal items (selected)
- SSIF interest income government debt: 287 366 366 444 444 444 501 501 560 622 687 754
- SSIF government debt holding (% of total Assets): 54 56 56 57 57 58 58 59 60 60 60
- NEPCO additional unallocated measures: 0 0 3 0 3 0 3 0 3 0 3 0

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

---

### NEPCO: operating balance and financing (selected lines)
- NEPCO Revenues (total): 1,361 1,416 1,414 1,484 1,455 1,522 1,515 1,576 1,621 1,651 1,680
- Electricity sales: 1,334 1,361 1,385 1,414 1,408 1,475 1,468 1,525 1,566 1,592 1,620
- Expenses (total): 1,594 1,815 1,823 1,986 1,952 1,979 1,957 1,987 2,011 2,042 2,065
- Purchase of electricity: 1,458 1,598 1,610 1,698 1,655 1,661 1,645 1,648 1,646 1,653 1,656
- Depreciation: 323 323 234 333 34 33 33 33 33 33 33
- Interest payments 2/: 116 164 164 209 212 240 240 267 292 316 337
- Additional measures: 0 0 3 0 30 30 30 30 30 30 30
- Operating balance (QPC): -233 -400 -409 -502 -497 -428 -412 -381 -359 -360 -356
- Total net domestic financing: 233 400 409 502 497 428 412 381 359 360 356
  - Banks: 487 544 425 502 530 428 507 381 359 360 356
  - Loans and bonds: 395 551 655 502 530 428 507 381 359 360 356
  - Overdrafts: 92 -53 -118 0 0 0 0 0 0 0 0
- Operating balance (percent of GDP): -0.7 -1.1 -1.1 -1.3 -1.3 -1.1 -1.0 -0.9 -0.8 -0.8 -0.7
- Brent oil prices (USD per barrel): 96 81 79 79 78.6 75 74 71 69 68 68
- Outstanding loans and bonds (stocks, end-of-period): 3,124 3,674 3,779 4,176 4,341 4,604 4,943 5,324 5,683 6,044 6,399
- Total payables: 2,834 2,661 2,441 2,661 2,408 2,661 2,313 2,313 2,313 2,313 2,313
  - To government 4/: 2,009 2,009 1,789 2,009 1,789 2,009 1,789 1,789 1,789 1,789 1,789
  - To private sector: 824 652 652 652 619 652 524 524 524 524 524
- Of which: Increase in arrears (IT): 44 0 12 80 9 50 0 0 0 0 0

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

---

### Consolidated Water Sector: balance and financing (selected)
- Total Revenues (inc. Grants): 300 308 337 323 365 340 400 444 480 519 638
- Water Sales (combined): 181 188 225 202 242 218 262 289 305 321 413
- Expenditure (total): 333 364 377 377 383 385 392 405 417 429 594
- Electricity expenses: 128 136 134 144 135 146 137 142 147 150 157
- Interest payments: 33 35 30 37 27 38 28 29 30 31 32
- Operating balance (QPC): -33 -56 -40 -55 -18 -45 73 96 29 14 4
- Capital expenditure: 150 181 195 173 183 178 185 189 193 197 285
- WAJ Overall balance: -192 -257 -227 -246 -247 -247 -241 -181 -153 -133 -344
- Overall balance Consolidated Water Sector: -203 -262 -235 -252 -211 -250 -187 -160 -141 -116 -251
- Total net financing: 203 262 235 252 211 250 187 160 141 116 251
- Grants: 383 430 303 302 302 302 302 302 302 302 302
- Transfers from Central Government: 169 299 205 213 213 182 182 176 170 164 169
- Loans (net borrowing): 213 930 402 740 282 930 313 2, etc. (table shows series including foreign loans 213 930 402 740 282 930 313 132)
- Outstanding loans, of which: 2,027 2,295 2,262 2,548 2,502 2,770 2,712 2,917 3,117 3,311 3,512
- Domestic loans and bonds: 197 197 197 197 197 197 197 197 197 197 197
- Foreign loans: 385 424 415 464 442 504 470 499 528 559 591
- Effective interest rate (in percent): 1.6 1.7 1.5 1.6 1.2 1.5 1.1 1.1 1.0 1.0 1.0

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

---

### Balance of Payments: current account, trade, and reserves (selected)
- Current account (CA) (levels, USD millions): -3,820 -3,577 -1,761 -3,396 -2,657 -2,546 -2,217 -2,322 -2,451 -2,737 -2,793
- Trade balance: -11,578 -10,810 -10,307 -10,130 -10,208 -10,097 -10,674 -11,599 -12,587 -13,185 -13,731
- Exports f.o.b.: 12,798 12,497 12,608 12,696 12,103 13,132 12,578 13,126 13,710 14,419 15,268
- Imports f.o.b.: 24,376 23,307 22,915 22,826 22,311 23,229 23,252 24,726 26,297 27,604 28,999
  - Energy imports: 4,422 3,790 3,843 3,876 3,809 3,767 3,664 3,622 3,624 3,675 3,762
  - Non-energy imports: 19,954 19,516 19,072 18,950 18,502 19,462 19,587 21,103 22,673 23,929 25,237
- Services and income (net): 1,783 1,484 3,266 930 1,989 1,833 3,024 3,664 4,503 4,838 5,215
  - Travel receipts: 5,816 6,812 7,410 6,655 7,207 7,380 8,031 8,573 9,154 9,744 10,332
- Current transfers (net): 5,974 5,748 5,280 5,804 5,562 5,718 5,433 5,613 5,633 5,610 5,723
  - Public grants: 1,861 1,640 1,624 1,619 1,595 1,453 1,389 1,468 1,378 1,242 1,242
  - Remittances: 3,107 3,182 3,151 3,268 3,212 3,359 3,284 3,368 3,463 3,561 3,661
- Capital and financial account (net): -81,904 1,572 2,381 1,008 1,968 1,098 1,812 2,409 3,434 3,681
- Overall balance: -2,950 -1,673 -758 -1,014 -1,649 -578 -1,119 -511 -426 968 87
- Financing (levels): 2,950 1,673 758 1,014 1,649 578 1,119 511 42 -696 -887
- Gross reserves (USD millions): 18,190 17,542 19,081 17,824 19,716 18,722 20,211 21,199 22,339 23,122 23,757
- Gross usable reserves (USD millions): 16,432 15,784 17,319 16,066 17,965 16,965 18,460 19,448 20,588 21,371 22,006
- Current account (percent of GDP): -7.8 -7.0 -3.5 -6.3 -5.0 -4.5 -4.0 -3.9 -3.9 -4.1 -4.0
- Current account ex-grants (percent of GDP): -11.7 -10.2 -6.7 -9.4 -8.0 -7.1 -6.4 -6.4 -6.1 -6.0 -5.8
- Energy imports (percent of GDP): 9.1 7.4 7.6 7.2 7.1 6.7 6.5 6.1 5.8 5.6 5.4
- Nominal GDP (USD millions): 48,722 50,989 50,885 53,570 53,305 56,556 56,112 59,183 62,482 65,966 69,643

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

---

### External financing needs and sources (summary)
- Gross financing requirements (USD millions): 7,826 6,903 4,515 5,746 5,316 6,652 5,927 6,018 6,061 5,941 4,958
- Current account deficit (excl. grants): 5,682 5,217 3,385 5,015 4,252 3,998 3,606 3,790 3,829 3,980 4,036
- Amortization of public sector loans: 811 1,552 1,033 474 477 610 613 1,032 1,000 453 670
- Amortization of sovereign bonds: 1,000 0 0 0 0 1,000 1,000 1,000 1,000 1,250 0
- Change in reserves (+ = increase): -744 -648 434 282 635 898 495 988 1,140 783 635
- Gross financing sources (identified) (USD millions): 4,345 4,746 4,158 4,125 3,063 5,864 4,250 5,312 5,787 6,379 5,593
  - FDI, net: 1,269 1,261 780 1,499 770 1,931 1,014 1,473 1,958 2,346 2,606
  - Public grants: 1,861 1,640 1,624 1,619 1,595 1,453 1,389 1,468 1,378 1,242 1,242
  - Public sector borrowing (xcl. official budget support): 641 514 646 521 517 492 487 415 412 412 412
  - CBJ other financing (net): -156 -60 -121 -60 -40 -60 -40 -40 -40 -40 -40
- (1)+(2)-(3)-(4) Total financing needs (USD millions): 1,859 1,508 1,359 1,903 2,888 1,687 2,171 1,694 1,414 345 0
- Official public external financing (USD millions): 1,859 1,508 1,359 1,903 2,888 1,687 2,171 1,694 1,414 345 0
  - Identified official budget support: 1,335 1,476 1,327 1,448 2,438 524 1,504 692 412 345 0
  - IMF purchases (net): 525 323 245 545 0 264 260 260 260 261 00

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

---

### Foreign exchange needs and general government FX balance
- General Government Gross Needs (USD millions): 4,755 4,547 3,694 2,474 2,512 4,760 4,099 4,443 3,647 3,800 2,051
  - NEPCO energy imports: 987 793 841 809 791 757 745 741 732 733 729
  - Net interest payments: 390 742 397 934 656 1,066 749 730 328 405 399
  - Amortization of external debt: 2,478 1,686 1,130 731 1,064 2,654 2,321 2,228 2,232 1,961 923
- General Government Sources (USD millions): 4,327 4,761 4,850 3,095 2,562 3,742 3,418 3,887 3,405 3,604 1,654
  - Public grants: 1,861 1,640 1,624 1,619 1,595 1,453 1,389 1,468 1,378 1,242 1,242
  - Sovereign bonds/local FX bonds: 650 1,250 1,250 500 0 1,250 1,000 1,000 1,000 1,250 0
- General Government Balance (=(2)-(1), USD millions): -427 214 1,157 621 50 -1,019 -680 -556 -241 -196 -398
- Financing under the EFF (USD millions): 1,335 1,476 1,327 1,448 2,438 1,423 1,912 1,434 1,153 345 0
- Public Sector Net Balance under EFF (USD millions): 1,383 2,339 2,050 1,788 1,853 -494 736 -110 -228 -635 -1,033

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

---

### Monetary and central bank aggregates (selected)
- Monetary survey: Net foreign assets (JD millions): 6,910 6,827 7,723 7,189 8,574 8,379 9,491 10,145 10,933 11,671 12,300
  - Central bank net foreign assets: 11,433 11,102 12,152 11,216 12,754 12,406 13,423 14,077 14,865 15,603 16,232
  - Commercial banks net foreign assets: -4,523 -4,275 -4,428 -4,027 -4,180 -4,027 -3,932 -3,932 -3,932 -3,932 -3,932
- Broad money (stocks, JD millions): 41,672 44,006 42,635 46,488 44,662 49,080 47,015 49,587 52,352 55,270 58,352
  - Currency in circulation: 6,037 6,513 5,808 6,811 6,017 7,117 6,263 6,531 6,817 7,114 7,423
  - Jordanian dinar deposits: 28,985 30,482 30,230 32,258 31,609 34,200 33,212 35,090 37,111 39,247 41,507
  - Foreign currency deposits: 6,649 7,011 6,597 7,420 7,036 7,763 7,539 7,965 8,424 8,909 9,422
- Year-on-year broad money growth (percent): 5.5 5.6 2.3 5.6 4.8 5.6 5.3 5.5 5.6 5.6 5.6
- Year-on-year private sector credit growth (percent): 8.0 4.0 1.7 5.0 4.1 6.0 6.0 6.3 6.5 6.5 6.5

Central Bank of Jordan (selected)
- Net foreign assets (CBJ, JD millions): 11,433 11,102 12,152 11,216 12,754 12,406 13,423 14,077 14,865 15,603 16,232
- Foreign assets: 13,663 13,204 14,288 13,403 14,738 14,040 15,089 15,789 16,598 17,153 17,603
- Foreign liabilities: 2,230 2,102 2,136 2,187 1,984 1,634 1,667 1,713 1,733 1,550 1,371
- Jordanian dinar reserve money: 9,152 9,999 8,860 10,559 10,169 11,107 10,612 11,129 11,745 12,396 13,083
  - Currency: 6,678 7,154 6,441 7,451 6,650 7,757 6,897 7,165 7,451 7,748 8,057
  - Commercial bank reserves: 2,474 2,845 2,419 3,108 3,519 3,349 3,715 3,964 4,295 4,648 5,026
- Gross international reserves (USD millions, memorandum): 18,190 17,542 19,081 17,824 19,716 18,722 20,211 21,199 22,339 23,122 23,757
- Gross usable international reserves (USD millions): 16,432 15,784 17,319 16,066 17,965 16,965 18,460 19,448 20,588 21,371 22,006

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

---

### IMF Extended Fund Facility (EFF): access and phasing
- Board approval of EFF (January 10, 2024): 144.102 SDR million (42.0 percent of quota)
- Scheduled purchases by review (SDR million, percent of quota): First Review (April 1, 2024) 97.78 (28.5); Second Review (October 1, 2024) 97.78 (28.5); Third Review (April 1, 2025) 97.78 (28.5); Fourth Review (October 1, 2025) 97.78 (28.5); Fifth Review (April 1, 2026) 97.78 (28.5); Sixth Review (October 1, 2026) 97.78 (28.5); Seventh Review (April 1, 2027) 97.78 (28.5); Eight Review (October 1, 2027) 97.78 (28.5)
- Total: 926.37 SDR million (270.0 percent of quota)
- Note: Jordan's quota is SDR 343.1 million.

*Source: IMF staff estimates.*

---

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

### Annex I. Risk Assessment Matrix

### Annex I. Risk Assessment Matrix

### Global Risks — Summary of Risks, Economic Impact, and Policy Responses
- Intensification of regional conflicts  
  - Likelihood: High  
  - Economic Impact: High  
    - Disrupt trade (energy, food, tourism, supply chains), remittances, FDI and financial flows, payment systems; increase refugee flows.  
    - Worsen fiscal and current account balances; increase external financing needs.  
    - Inflation pressure could rise due to higher import prices.  
  - Policy Responses:  
    - Provide targeted fiscal measures to ensure delivery of essential public services, including security, and to support vulnerable households, including refugees.  
    - Strengthen social safety nets.

- Commodity price volatility  
  - Likelihood: High  
  - Economic Impact: High  
    - Recurrent commodity price volatility from supply disruptions and demand fluctuations causes external and fiscal pressures in EMDEs, cross-border spillovers, and social and economic instability.  
    - An increase in fuel and/or food prices would significantly increase fuel and/or wheat import bill; current account deficit and external financing needs.  
  - Policy Responses:  
    - Provide targeted fiscal measures to support vulnerable households, including refugees.  
    - Strengthen social safety nets.

- Abrupt global slowdown  
  - Likelihood: Medium  
  - Economic Impact: High  
    - Sharp synchronized global growth downturn with recessions in some countries; adverse spillovers through trade and financial channels; market fragmentation triggering sudden stops in EMDEs.  
    - China: contraction in property sector could weigh on private demand, amplify local government fiscal strains, result in disinflationary pressures and adverse macro-financial feedback loops.  
    - Europe: fallout from Russia’s war in Ukraine, supply disruptions, tight financial conditions, and real estate corrections exacerbate downturn.  
    - U.S.: tight labor markets and elevated inflation could prompt the Fed to keep rates higher for longer resulting in financial, housing, and commercial real estate market correction.  
    - Could reduce remittances and tourism inflows, worsen fiscal and current account balances, raise global risk premia, increase funding costs for corporates and the sovereign, and deteriorate bank asset quality.  
  - Policy Responses:  
    - Provide targeted support to vulnerable groups.  
    - CBJ to follow Fed and raise policy rates conditional on domestic conditions and capital flow responses to any change in spread over federal funds rate.  
    - Monitor banks’ buffers to withstand shocks, introduce measures recommended by the FSSA as appropriate.  
    - Accelerate structural measures that foster private investment and private sector development that creates jobs and promotes more sustainable and inclusive growth.

- Monetary policy miscalibration  
  - Likelihood: Medium  
  - Economic Impact: Medium  
    - Major central banks could loosen prematurely hindering disinflation or keep policy too tight causing abrupt financial adjustments and weakening credibility.  
    - Sharp tightening of global financial conditions and spiking risk premia can increase vulnerabilities of the sovereign, banks, and households.  
  - Policy Responses:  
    - CBJ to follow the U.S. Fed and raise policy rates conditional on domestic conditions and capital flow responses to any change in spread over the federal funds rate.  
    - Provide targeted support to vulnerable groups.  
    - Monitor banks’ buffers to withstand shocks, introduce measures recommended by the FSSA as appropriate.

- Systemic financial instability  
  - Likelihood: Medium  
  - Economic Impact: Medium  
    - High interest rates, risk premia and asset repricing amid slowdowns and political uncertainty can trigger market dislocations with cross-border spillovers and adverse macro-financial feedback affecting weak banks and NBFIs.  
    - Could create a negative feedback loop between sovereign and banks, higher funding costs, and asset quality deterioration for banks.  
  - Policy Responses:  
    - CBJ to follow the U.S. Fed and raise policy rates conditional on domestic conditions and capital flow responses to any change in spread over the federal funds rate.  
    - Monitor banks’ buffers to withstand shocks, introduce measures recommended by the FSSA as appropriate.

- Sovereign debt distress  
  - Likelihood: Medium  
  - Economic Impact: High  
    - Domino effects from high global interest rates, a growth slowdown in AEs, unfunded fiscal spending, and/or disorderly debt events in some EMDEs can spill over to other highly indebted countries, amplified by sovereign-bank feedback, resulting in capital outflows, rising risk premia, and loss of market access.  
    - Higher risk premia would result in higher funding costs for corporates and the sovereign; bank asset quality could deteriorate; capital outflows could materialize.  
  - Policy Responses:  
    - If market conditions become disorderly leading the country to near crisis circumstances, capital flow measures could be considered as part of a broader macroeconomic package to address the root causes of the crisis in accordance with the IMF Institutional View.  
    - Maintain prudent macroeconomic policies.  
    - Continue fiscal consolidation to ensure debt sustainability.

- Deepening geoeconomic fragmentation  
  - Likelihood: High  
  - Economic Impact: Medium  
    - Broader conflicts, inward-oriented policies, weakened international cooperation could fragment trade, FDI, supply chains, payments systems, and reduce growth.  
    - FDI inflows could slow; higher import costs would worsen fiscal and current account balances and could affect potential growth if persistent.  
  - Policy Responses:  
    - Accelerate structural reforms that promote economic diversification and foster greater private sector development that creates jobs and promotes inclusive growth.  
    - Monitor banks’ buffers to withstand shocks, introduce measures recommended by the FSAP as appropriate.

Note: The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path. The relative likelihood is the staff’s subjective assessment of the risks surrounding the baseline (“low” is meant to indicate a probability below 10 percent, “medium” a probability between 10 and 30 percent, and “high” a probability between 30 and 50 percent). The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities. Non-mutually exclusive risks may interact and materialize jointly. The conjunctural shocks and scenarios highlight risks that may materialize over a shorter horizon (between 12 to 18 months) given the current baseline. Structural risks are those that are likely to remain salient over a longer horizon.

### Domestic Risks — Summary of Risks, Economic Impact, and Policy Responses
- Increase in water scarcity due to climate change  
  - Likelihood: Medium  
  - Economic Impact: High  
    - Water shortages would affect daily life, disrupt economic activity, and could trigger social discontent.  
  - Policy Responses:  
    - Prioritize securing sustainable water supplies.  
    - Targeted fiscal measures to support vulnerable households.  
    - Adopt measures to improve efficiency and ensure financial sustainability of the water sector.

- Persistently high unemployment  
  - Likelihood: Medium  
  - Economic Impact: High  
    - High unemployment, especially among youth, could amplify poverty and inequality, heighten social pressure, weaken reform momentum, damage investor perceptions, slow growth, and call debt sustainability into question.  
  - Policy Responses:  
    - Accelerate structural reforms that promote economic diversification and foster greater private sector development that creates jobs and promotes inclusive growth.  
    - Strengthen social safety nets.

---

### Annex II. Economic Resilience Amidst Headwinds—An Analysis of Spillovers of Conflicts

### A. Introduction — Context and Historical Performance
- Jordan’s resilience  
  - Jordan sits in a region where conflicts are recurring, causing human suffering and adverse economic spillovers via trade, refugees, and tourism.  
  - Jordan has withstood impacts and avoided more severe adverse effects on economic output thanks to prudent macroeconomic policies and support from the international community.  
  - Implementing reforms to diversify the economy and improve resilience while continuing prudent macroeconomic policies is crucial going forward.

- Historical growth performance and drivers  
  - Jordan maintained an average growth rate of about 4 percent during 2000–23, thanks to fiscal discipline, public expenditure rationalization, sound monetary and financial management that kept inflation under control, growth-enhancing structural reforms, and development partners’ financial and technical support.  
  - The 2003 Iraq war disrupted trade ties, severed Jordan's access to subsidized oil, elevated fuel costs, and contributed to inflation. The arrival of approximately 800,000 Iraqi refugees further contributed to inflation via higher food and real estate prices.  
  - Other shocks: 2011 Arab Spring disruptions, natural gas pipeline disruptions from Egypt since 2011, and cross-border closure with Iraq in 2015 contributed to fiscal pressures.

### B. Spillover Effects of Regional Conflicts — Empirical Analysis
- Methodology and data notes  
  - Dynamic responses estimated using local projections (Jordà et al., 2005) on a panel dataset with 128 countries.  
  - Conflicts are defined as the total numbers of conflicts happening in bordering states for each country at any given point in time (Uppsala Conflict data). The conflict definition: "the deliberate use of armed force by the government of a state or by a formally organized group against civilians which results in at least 25 deaths in a year".  
  - Analysis controls for investment share, terms of trade, trade openness, refugee presence (contemporaneous and lagged), and interacts with a dummy variable on MENA economies to identify average spillovers.  
  - Note: As a sensitivity analysis, a dummy has also been applied to Jordan; results broadly consistent but insignificant with large standard errors and wide confidence intervals due to data availability.  
  - Neighboring countries defined as those that share a border, of any length.

- Impacts on GDP per capita and other macro indicators (MENA)  
  - Conflicts in neighboring countries have a long-lasting impact on output per capita for MENA countries: an increase in the number of conflicts is associated with a cumulative reduction of 1.9 percent seven years after the conflict (Annex II. Figure 1).  
  - For the rest of the world, the impact on output per capita due to conflict in bordering states is statistically insignificant and much smaller than for MENA.  
  - Conflict in neighboring economies is associated with:  
    - An increase in debt to GDP ratios.  
    - A drop in fiscal revenues.  
    - A deterioration in the current account balance.  
    - A reduction in domestic consumption.  
    - A reduction in reserve assets for MENA countries.  
    - A statistically significant increase in investment, indicating a potential substitution effect away from the bordering countries in conflict.

- Impacts of conflicts in trading partners  
  - Conflicts in trading partners of MENA countries tend to have adverse spillovers: a conflict in trading partners leads to a drop in output per capita of around 1.7 percent in the seven years after the initial shock (Annex II. Figure 2), though this result is not statistically significant.  
  - Conflicts in trading partners are associated with:  
    - Significant deterioration in current account balances.  
    - An increase in core inflation.  
    - A depreciation in exchange rates.  
    - An increase in public debt and an associated decrease in fiscal revenues.  
    - Statistically significant adverse impacts on domestic consumption.

- Notes on magnitude specification in figures  
  - Impact estimates correspond to an increase in the number of conflicts to the 15th percentile of the world distribution: for bordering states this corresponds to approximately two conflicts annually; for trading partners this corresponds to approximately three conflicts annually.  
  - In figures, ***, **, and * indicate statistical significance at the 1, 5, and 10 percent level, respectively. Empty bars indicate lack of significance at the 10 percent level. The impact on the current account balance and debt to GDP is in percentage point change.

### C. Main Channels of Spillovers — The Case of Jordan
- Overview (lead-in to detailed analysis in the annex)  
  - Regional conflicts affect Jordan through trade disruptions, refugee inflows, tourism declines, energy supply disruptions, and financial spillovers.  
  - Jordan’s historical resilience is attributed to prudent macroeconomic management and external support, but continued reform to diversify and strengthen resilience is emphasized.

*International Monetary Fund — Annex I. Risk Assessment Matrix and Annex II. Economic Resilience Amidst Headwinds—An Analysis of Spillovers of Conflicts*

### 8. The impact of regional conflicts can be transmitted to Jordan through multiple

### 8. The impact of regional conflicts can be transmitted to Jordan through multiple channels

### Channels of transmission — overview
- Jordan is a small open economy exposed to spillovers via trade, remittances, tourism, investor sentiment (private investment and access to financing), and refugee inflows.
- The influx of refugees increased public spending on healthcare, education, electricity, water and sanitation provision, and social services.

### Trade exposures and concentration
- Jordan’s trade openness (total import and export as a share of GDP, goods and services) stood at over 100 percent in 2022.
- Footnote: Jordan’s trade openness (in goods only) stood at 80.5 percent in 2022.
- Over the past two decades:
  - Export of high value-added goods (machinery, vehicles, and electronics) has decreased.
  - Import of raw materials, especially crude oil and natural gas, have increased substantially.
- Trading partner concentration increased: share of goods export to the top 3 destinations rose from 33.7 percent in 2000 to over 50 percent in 2023.
- Higher trade concentration increases concentration risk and the potential magnitude of external spillovers.

### Remittances
- Net inflow of workers’ remittances increased from around US$1.5 billion in 2000 to US$2.7 billion in 2023.
- Remittances have remained stable in recent years and are a steady source of income for Jordan.
- A large portion of Jordanian remittances originates from oil exporting nations in the Gulf Cooperation Council, limiting disruption from conflicts in neighboring non-GCC countries.

### Tourism impacts and dynamics
- Tourism accounted for an average of 11 percent of GDP during 2000–23.
- Tourism accounted for around 6 percent of total employment in 2022.
- Tourism receipts increased from US$723 million in 2000 (slightly above 8 percent of GDP) to $US 7.4 billion in 2023 (about 14 percent of GDP).
- Tourist arrivals fell from 8.1 million in 2010 to 4.8 million in 2015 due to regional conflicts, reducing tourism receipts.
- Jordanian expats accounted for an average of 34 percent of total arrivals, mitigating some conflict-related declines.
- Tourist arrivals recovered since 2015, were interrupted by the pandemic, and exceeded pre-pandemic levels at the beginning of 2023.

### External position, FDI, and reserves
- After the Iraq war, Jordan’s current account balance moved from a surplus of 11.8 percent in 2003 to a deficit of 18 percent in 2005.
- International reserves rose from roughly $US5 billion in 2003 to US$13 billion in 2010.
- FDI rose from about 5 percent of GDP in 2003 to 23 percent in 2006, then declined to below 5 percent of GDP in recent years.
- Jordan experienced a further external position deterioration after the Arab Spring: current account from 6.9 percent in 2010 to 14.9 percent in 2012.
- International reserves have been used to offset current account shortfalls, but have since been strengthened to provide buffers and safeguard the exchange rate peg.

### Refugee inflows and fiscal/resource strain
- As of December 2023, Jordan hosts approximately 3 million refugees, of which 730,000 are registered with UNHCR.
- There are 2.3 million Palestinian refugees in Jordan registered with UNRWA.
- International funding for refugee support has declined:
  - Funding covered 64 percent of requested funding in 2018 and 33 percent in 2022.
  - As of November 2023, received funding accounted for about 21 percent of total support requested.
  - In May 2024, UNHCR announced a US$28 million reduction in its programs in Jordan for 2024 due to lack of funding.
- Economic absorption challenges:
  - Jordan’s growth averaged about 2 percent from 2015 to 2023, insufficient to absorb expanding job seekers.
  - Skills mismatch between refugee labor supply and Jordan’s labor demand limits hiring scope.
  - More than 396,000 work permits have been issued to Syrian refugees as of December 2023, concentrated in agriculture, construction, manufacturing, and exceptional higher-skilled employment.

### Market confidence and investor indicators
- Sovereign spreads for Jordan remained relatively contained through past conflicts, reflecting strong fundamentals and prudent policies.
- Credit ratings were downgraded in 2013 but subsequently stabilized, enabling continued market access.
- Domestic investor confidence strengthened substantially since 2020 as proxied by the Jordan Investor Confidence Index (composite index scaled 100–200).
- Sovereign spreads widened temporarily by about 100 basis points in late October 2023 following the Gaza conflict, and widened again after Iran’s missile attack on Israel in early April 2024, but impacts dissipated quickly and spreads declined and remained stable thereafter.

### Recent spillovers from the Gaza conflict (high-frequency impacts)
- Tourism: 10 percent year-on-year decline in tourist arrivals from Europe and North America in November 2023; decline in hotel bookings.
- Trade and shipping:
  - Disruptions in Red Sea shipping routes via Bab Al-Mandab reduced cargo traffic through Al-Aqaba port.
  - An estimated 30 percent of Jordan’s imports and 20 percent of exports may require direct passage through Bab Al-Mandab.
  - Fertilizer exports: 54 percent exported through Bab Al-Mandab during 2020–22.
  - Sulfur and salt: 85 percent exported through Bab Al-Mandab during 2020–22.
  - Government response included developing alternative land shipping routes and feeder routes.
- Macro outlook: the current account deficit could expand in 2024 but is expected to narrow later.
- Inflation and currency indicators:
  - Inflation was 1.3 percent in April 2024 (y-o-y).
  - Dollarization decreased to 17.9 percent by end-2023 from a pre-pandemic level of 21 percent.

### Growth risks and channels of economic impact
- Growth outlook depends substantially on the duration and intensity of the conflict in Gaza.
- Additional channels of impact include domestic boycotts of perceived biased companies, which can reduce consumer spending and pressure tax revenues, employment, and growth.
- Multifaceted impacts underscore Jordan’s delicate balance in maintaining economic stability amid regional conflicts.

### Policy implications and recommendations
- Continue prudent macroeconomic policies to ensure fiscal and debt sustainability, financial stability, and to anchor market confidence against external shocks.
- Pursue a more diversified economy to shield against external shocks by:
  - Diversifying trade profile across products, partners, and routes.
  - Moving up the quality ladder in existing products where feasible.
  - Improving supply chain management, including preparing alternative sources of supply and developing additional shipping routes.
  - Formulating a diversification strategy aligned with Jordan’s comparative advantages, including its well-educated labor force, to shape a coherent reform agenda.

_Italicized source: IMF staff report content from “1jorea2024002-print-pdf - 8. The impact of regional conflicts can be transmitted to Jordan through multiple channels.”_

### 1. Trading partner is a country that has a trade agreement with another country in conflict.

### 1jorea2024002-print-pdf - 1. Trading partner is a country that has a trade agreement with another country in conflict.

### Definitions, data sources, and variables
- Trading partner dummy:
  - T_TN_TT_TT (notation in source): = 1 if i and j share a foreign trade agreement.
  - Data on the trade agreement is taken from the CEPII database which uses the raw bilateral measures from WTO.
  - Note: Data on FTA is not available for 2022, and the most recent data is 2021.
- Neighbor dummy:
  - B_border_NTN... (notation in source): = 1 if i and j share a border.
  - This dummy is interacted with the conflict measure in the adjacent country.
- Spillover construction:
  - SSS_CCC_Co..._N_N_sh..._C_k_it = Σ_j T_CsC_iijt * C_cojkt (notation preserved).
  - T_CsC_iijt represents trade connection (trade agreement or border) between i and j.
  - C_cojkt represents the number of conflicts; the number of conflicts is the measure used in the analysis.
  - Due to outliers, the percentile equivalence of the spillover measure is used.
  - Source for the data is CEPII gravity data.

### Empirical approach (local projections)
- Dynamic responses estimated using local projection approach a la Jordà (2005).
- Impulse response function regressions (notation preserved):
  - y_{i,t+h} − y_{i,t−1} = β_{0,h} S_{i,t} + β_{1,h} S_{i,t} * MENA_{i} + Σ β_{2,h} S_{i,t−i_l} + Σ β_{3,h} C_{i,t−i_l} + Σ γ_{1,i,h} (y_{i,t−i} − y_{i,t−i−1}) + Σ θ_{i,h} X_{i,t−i} + α_{i,h} + α_{t,h}
- Variable definitions in regressions:
  - y_{i,t} is log of per-capita GDP.
  - S_{i,t} is the spillover shock.
  - C_{i,t} is the own conflict variable.
  - X_{i,t} includes controls: trade openness, terms of trade (pct change), export partners growth, investment/GDP, lagged number of refugees.
  - h is the horizon for which the impulse response is computed.
  - Two lags of GDP growth and the spillover and own conflict variable are included.
  - Standard errors are clustered at the country level.
- Interpretation of coefficients:
  - β_{0,h} directly estimates the impulse response of per-capita GDP for horizon h in response to the spillover shock among all economies excluding MENA countries.
  - β_{1,h} estimates the differential impulse response of per-capita GDP for horizon h in response to the spillover shock among ME&CA countries.
  - Average impulse response for MENA countries is the sum of β_{0,h} and β_{1,h}.

### Jordan: Recent macroeconomic performance and near-term projections (from Letter of Intent)
- 2023 outturns and near-term:
  - Economic growth in 2023: 2.6 percent.
  - Central government primary deficit (excluding grants and transfers to NEPCO and WAJ) in 2023: 2.7 percent of GDP (down from 3.6 percent of GDP in 2022).
  - Combined public sector primary deficit in 2023: 4.5 percent of GDP (from 4.8 percent of GDP in 2022).
  - Overall general government primary surplus (including grants) in 2023: 0.5 percent of GDP.
  - Public debt at end-2023: 89.5 percent of GDP.
  - Current account deficit: narrowed from almost 8 percent in 2022 to less than 4 percent of GDP in 2023.
  - Gross usable international reserves increased to over US$17 billion.
  - Inflation (y-o-y) in December 2023: 1.6 percent.
  - Banking system: described as liquid, profitable, and well-capitalized.
- Projections and targets:
  - Growth projection for the current year (2024): moderated to 2.4 percent.
  - Expected current account deficit in 2024: about 5 percent of GDP.
  - Growth expected to bounce back in 2025 to almost 3 percent, conditional on the war ending and reforms progressing.
  - Central government primary deficit target for the year: reduce by 0.6 percent of GDP to 2.1 percent of GDP.
  - Expected reduction in combined public sector primary deficit to 4.0 percent of GDP (year unspecified, in program context).
  - Expected overall general government primary surplus (including grants) of 1.3 percent of GDP (by end-2024 projection context).
  - Public debt expected to be just over 89 percent of GDP by end-2024; target to reduce public debt to below 80 percent of GDP by 2028.
- Fiscal measures and reforms (selected):
  - Broaden the tax base progressively and equitably, including expanding coverage through e-invoicing.
  - Income and Sales Tax Department and Customs to combat smuggling, under-invoicing, and collect tax arrears.
  - Measures to contain operational losses of utility companies; plan to reduce cost of electricity generation via renegotiation of power purchasing agreements and introducing legally and regulatory permissible levies on electricity generating companies.
  - Ministry of Finance Treasury to make budgetary spending units’ electricity payments by deducting payments from spending units’ spending allocations.
  - New definition of spending arrears: time limit on overdue payments set to 60 days, coverage Central Government Spending Units.
  - Ministry of Finance to adjust allocations based on quarterly updated cash forecasts and require General Budget Department approval prior to issuing commitment vouchers.
  - CBJ to align prudential regulations regarding asset classification with Basel Core Principles (SB for June 2024).
  - Time-of-use tariffs to be introduced effective July 1, 2024, for sectors accounting for at least 15 percent of total electricity consumption (SB for July 2024).
  - Legislative amendments to the Renewable Energy Law adopted by parliament to allow net billing for new self-generators (SB for September 2024).
  - CBJ to implement recommendations of recent safeguards assessment and gradually reduce concessionality of subsidized lending scheme.

### Program performance, requests, and monitoring
- Program performance:
  - Met all commitments for the first review under the EFF arrangement.
  - Met all end-December 2023 performance criteria and the end-January 2024 indicative target, and most indicative targets for end-December 2023.
  - Met most indicative targets for end-March 2024.
  - Met all structural benchmarks set for the first review.
- Request to IMF:
  - Request completion of the first review under the extended arrangement and approval to make a purchase in the amount of SDR 97.784 million.
  - Request modification of the end-June 2024 and end-December 2024 performance criteria on the CBJ’s net international reserves to reflect stronger performance (as presented in Table 1).
- Monitoring:
  - Implementation will be monitored through semi-annual quantitative performance criteria, structural benchmarks, and quarterly indicative targets.
  - Expected timing: second review on or after October 1, 2024; third review on or after April 1, 2025.
- Authorization:
  - Government authorizes the IMF to publish this Letter of Intent and its attachments, as well as the accompanying staff report.

### Key quantitative figures from Table excerpts (preserved exactly as presented)
- Net International Reserves of the Central Bank of Jordan in USD million (stock, floor) examples from Table 1:
  - 13,363; 13,494; 14,761; 12,763; 12,939; 14,905; 13,029; 14,029; 12,687; 13,687; 13,622; 14,200; 14,000; 14,200.
- Public debt (stock, ceiling) examples from Table 1:
  - 32,100; 32,289; 32,779; 32,538; 33,013; 33,150; 33,188; 33,350; 33,900; 33,900; 34,300; 34,900.
- Memorandum items (examples):
  - Foreign budgetary grants received by the central government (flow): 777; 712; 208; 120; 80; 250; 1007; 327; 324; 0180 (notation preserved).
  - Foreign budgetary grants and loans received by the Central Bank of Jordan (USD millions, flow, cumulative from beginning of year): 0; 13; 150; 226; 1086; 12247; 1068; 27593; 33550543 (notation preserved).
  - Programmed stock of the combined health and energy arrears: 90878583808075757070; 6560 (notation preserved).
- Note: The Table 1 and Table 2 entries are included in the source and are preserved in their numeric forms above.

### Structural conditionality (selected items and time frames, status)
- Structural Benchmarks for the First Review (all listed as Met):
  - 1: ISTD to introduce a digital track-and-trace system for alcohol. March 2024 — Met.
  - 2: Effective January 1, 2024, all hiring and promotion decisions for all senior civil service positions will be based on professional qualifications and performance. March 2024 — Met.
  - 3: Submit to parliament legislation to abolish licenses in the tourism sector as identified in the 2019 cabinet decision. March 2024 — Met.
  - 4: Cabinet to adopt a plan to reduce the cost of electricity generation born by NEPCO. April 2024 — Met.
  - 5: Introduce a legally and regulatory permissible levy on electricity generation companies. April 2024 — Met.
  - 6: Request a legal interpretation of Article 157 and related articles of the Companies Law from the Special Bureau for Interpreting Laws. May 2024 — Met.
- Structural Benchmarks with due dates after the First Review (selected entries and due dates preserved):
  - 7: The CBJ to align prudential requirements on asset classification with Basel Core Principles. June 2024.
  - 8: Apply time-of-use tariffs to capture at least 15 percent of total electricity consumption. July 2024.
  - 9: ISTD and Customs Administration to enter into a data sharing agreement. September 2024.
  - 10: Facilitate expedited and predictable goods clearance and mandatory use of the digital licensing hub platform for the 5 largest control entities. September 2024.
  - 12: Introduce and apply an economically efficient tariff design switching from net metering to net billing for new self-generators. September 2024.
  - 16: Implement a performance-based salary-setting mechanism for all Category 1 civil service employees. December 2024.
  - 17: Apply time-of-use tariffs to capture at least 30 percent of total electricity consumption. January 2025.
  - 18: ISTD to mandate e-invoices for 100 percent of sales transactions. March 2025.
  - 19: Submit amendments to the labor law to parliament to increase labor market flexibility. September 2025.
  - 20: Submit amendments to the social security law to parliament. September 2025.
  - 21: Submit legislation to strengthen the Competition Directorate. October 2025.
  - 22: The CBJ to introduce Pillar 2 risk assessment methodologies. November 2025.
  - 23: Complete the digitalization of all government services. December 2025.
  - 24: The CBJ to align prudential requirements for concentration risk and related party exposure with Basel Core Principles. November 2026.
  - 25: The CBJ to design and operationalize procedures for compensation of depositors, together with JODIC. November 2026.

*Source: 1jorea2024002-print-pdf - 1. Trading partner is a country that has a trade agreement with another country in conflict.*

---


_Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1jorea2024002-print-pdf.pdf_