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### EXECUTIVE SUMMARY — Context and recent developments
- Growth projected to moderate to 2.3 percent in 2024 from 2.7 percent in 2023.
- Growth in 2025 projected at around 2.5 percent, assuming the conflict continues through 2025 without further escalation.
- Current account deficit projected to widen slightly to about 4½ percent of GDP in 2024–25.
- Gross usable international reserves projected to reach about US$18 billion by end-2024; reserve adequacy just over 100 percent of the Fund’s ARA metric.
- Sovereign spreads narrowed to pre-conflict levels; Jordan’s credit rating was upgraded in 2024 (first upgrade in more than two decades).
- Labor market:
  - Unemployment rate: 21 percent.
  - Youth unemployment rate: 47.5 percent.
  - Female unemployment rate: 31 percent.
- Monetary and inflation:
  - CBJ committed to exchange rate peg to the U.S. dollar.
  - Policy rate cuts followed U.S. Federal Reserve easing; inflation expected to be around 2 percent in 2025.
- Program implementation:
  - All quantitative performance criteria (PCs) and structural benchmarks (SBs) for the second review were met.
  - Upon completion of the second review, a disbursement of SDR 97.784 million will be made available to Jordan.

### OUTLOOK AND RISKS
- Baseline growth path:
  - 2024: 2.3 percent.
  - 2025: around 2.5 percent.
  - Medium term: pick-up to about 3.0 percent (memo: Real GDP growth series includes: "2.9 2.3 2.5 3.0 3.0 3.0 3.0 3.0 3.0").
- Downside scenario (Box 1):
  - Growth would fall close to 2 percent in 2024 (vs. 2.3 percent baseline) and to 1.8 percent in 2025 (vs. 2.5 percent baseline).
  - Revenues would weaken by about 1 percent of GDP in 2025–27 absent policy changes.
  - Additional security and social assistance needs estimated at about 0.5 percent of GDP per year.
  - Financing needs larger by some 3 percent of GDP over 2025–27; 80 percent debt-to-GDP target delayed to 2030 under the adverse scenario.
- Key risks:
  - Downside: further escalation of the conflict, deeper geoeconomic fragmentation, slowdown in global growth, commodity price volatility, climate-change risks (notably water scarcity), rising social tensions.
  - Upside: early resolution of the conflict, faster global easing of interest rates, stronger global growth, accelerated reform implementation.

### FISCAL POLICY — past progress and near-term priorities
- Debt and deficits:
  - Public debt close to 90 percent of GDP at end-2023 (from 74.3 percent of GDP in 2018).
  - Central government primary deficit more than halved from 5.7 percent of GDP in 2020 to 2.7 percent of GDP in 2023.
  - General government primary deficit (excluding grants) reduced from 4.5 percent of GDP in 2020 to 1.4 percent of GDP in 2023.
- 2024 outcomes and adjustments:
  - Revenues faced a shortfall of about 1½–1¾ percent of GDP in 2024 driven by weaker domestic demand, lower fertilizer prices, and EV adoption shifts.
    - lower consumption/imports and tourist spending: about 0.8 percent of GDP.
    - lower profit taxes and royalties (fertilizer prices): about 0.5 percent of GDP.
    - lower sales and fuel taxes due to EV shift: about 0.5 percent of GDP.
  - Authorities curtailed capital spending by over 1 percent of GDP and raised taxes on electric vehicles and e-cigarettes yielding almost 0.2 percent of GDP in 2024.
  - Central-government primary deficit (excluding grants and transfers to public utilities) contained to 2.9 percent of GDP in 2024 (MEFP ¶6).
  - Overall general government primary deficit (excluding grants) expected broadly unchanged in 2024 at 1.3 percent of GDP (compared to 1.4 percent in 2023).
  - Public debt expected to be contained at just over 90 percent of GDP by end-2024.
- Refugee-related fiscal pressures (as of September 2024):
  - 621,000 Syrians registered with UNHCR.
  - Total registered refugee population: 689,000.
  - 2.3 million Palestinian refugees under the UNRWA mandate.
  - Nearly 447,000 work permits issued to refugees as of September 2024; only 1,227 work permits issued between July and September 2024 after the fee-waiver expiration.
  - Donor support declined sharply: in 2023 Jordan received only 29 percent of its budgetary needs for the Syrian response; WFP suspension/reduction left beneficiaries receiving only US$21 per person per month for some cohorts.
- Medium-term fiscal plans (2025–28):
  - 2025 budget aims to reduce the central government primary deficit (ex grants and transfers to utilities) by 0.9 percent of GDP to reach 2.0 percent of GDP in 2025.
  - 2025 revenue measures total 1 percent of GDP, including:
    - increase in taxation of electric vehicles and e-cigarettes (0.8 percent of GDP);
    - deferral of a further reduction in customs tariffs (0.15 percent of GDP);
    - collection of tax arrears (0.1 percent of GDP).
  - Overall general government primary deficit (ex grants) projected to be reduced by 1.1 percent of GDP to 0.2 percent of GDP in 2025; public debt to decline to just below 90 percent of GDP.
  - Continued annual fiscal adjustment by the central government of about 0.9–1 percent of GDP in 2026–28.
  - General government primary balance (ex grants) projected to move from a deficit of 0.2 percent of GDP in 2025 to a surplus of about 3 percent of GDP in 2028.
  - New SB: design and adopt a Medium-Term Revenue Strategy (MTRS) with IMF support (September 2025).
- Fiscal safeguards and public financial management:
  - Measures to avoid arrears accumulation: Ministry of Finance treasury direct payments for electricity of spending units; prior approval from General Budget Department for new commitments; centralized authority to grant healthcare exemptions and new pricing rules for medical services (SB for May 2025).
  - Continued rollout of JONEPS and linkage with GFMIS; all capital projects in the 2025 budget approved by PIM and registered in NRIP (met SB for September 2024).
  - Develop and adopt an SOE ownership policy by Spring 2026 (new SB for March 2026).

### ELECTRICITY AND WATER SECTORS — fiscal and reform actions
- Electricity sector:
  - Utilities’ sector losses in 2023 (NEPCO, WAJ, water distribution companies) reached 1.8 percent of GDP.
  - Time-of-use tariffs rolled out beginning July 2024, capturing 15 percent of electricity consumption (met SB for July 2024); target to capture 30 percent by January 2025 (SB for January 2025) and all sectors by September 2026 (new SB for September 2026).
  - Smart meters for residential sector planned for completion by end-2025 (new SB for June 2026).
  - Renewable Energy Law amended to switch from net metering to net billing for new self-generators effective September 2024 (met SB for September 2024).
  - NEPCO operational loss reduction target: reduce to below 0.8 percent of GDP by 2028.
  - Progress in clearing NEPCO’s arrears with ITs for end-June and end-September 2024 met.
- Water sector:
  - Multi-year plan to raise water tariffs to cover operating and maintenance costs by 2030.
  - First tariff increase of 4.6 percent effective December 2023; second increase to be implemented in December 2024.
  - Non-revenue water (NRW) reduced by over 5 percent since mid-2022 to 47 percent; annual reduction target of 2 percent aiming for NRW of 37 percent by 2030 and 25 percent by 2040.
  - Sector losses expected to reach 0.6 percent of GDP in 2024 and decline to 0.2 percent of GDP by 2028.
  - Major investment: Aqaba-Amman Conveyance project — preferred bidder selected; discussions expected finalized by end-2025; project aimed online by end of 2029.

### MONETARY AND FINANCIAL POLICIES
- CBJ stance:
  - Continue to safeguard the exchange rate peg to the U.S. dollar and maintain monetary and financial stability; policy rate adjustments followed the U.S. Federal Reserve.
  - Deposit dollarization reached just under 18 percent, the lowest since 2017.
  - Gross usable reserves exceeded US$18 billion by end-October 2024; reserve adequacy around 100 percent of the Fund’s ARA metric.
  - NIR targets for the rest of 2024 and 2025 revised upwards to reflect stronger outcomes through end-September.
  - CBJ gradually reducing concessionality of its subsidized lending facility; two lending schemes expired in 2023; remaining scheme to see an initial increase of 50 basis points on new loans when the regional conflict subsides; CBJ should aim to phase the scheme out (MEFP ¶10).
- Banking system:
  - Capital Adequacy Ratio (CAR) well above regulatory minimum of 12 percent (system-wide CAR reported as 17.6 percent end-June 2024).
  - Non-performing loans (NPL) broadly stable; NPLs at 5.6 percent (2024 H1).
  - Coverage Ratio: 73.1 percent (end-June 2024).
  - Latest stress tests indicate the banking sector can withstand severe shocks at branch and consolidated levels.
- Financial sector reform and crisis preparedness:
  - Implemented FSSA recommendations: aligned asset classification with Basel Core Principles (met SB for June 2024); multi-agency crisis management committee operational; strengthened Financial Stability Committee (FSC).
  - Planned SBs:
    - Pillar 2 risk assessment methodologies (SB for November 2025).
    - Align prudential requirements for concentration risk and related party exposure with BCPs (SB for November 2026).
    - Design and operationalize depositor compensation procedures with JODIC (SB for November 2026).
  - Continued enhancements to AML/CFT following removal from FATF gray list (October 2023).

### STRUCTURAL REFORMS AND INCLUSIVENESS
- Reform priorities:
  - Enhance business environment and competition; amend Competition Law (SB for October 2025).
  - Increase labor market flexibility and female labor participation; submit Labor Law and Social Security Law amendments (SBs for September 2025).
  - Improve access to finance for MSMEs; rationalize development finance initiatives; facilitate credit bureau/data enhancements.
  - Digitalize government services (SB for December 2025).
- Business environment and firm performance:
  - ROA around 2 percent since 2010 (MENA average ROA: 4 percent).
  - ROE around 2.5 percent (period 2012–23).
  - ISSF has leveraged $98 million for entrepreneurial support.
  - Informality: estimated more than 55 percent of private sector Jordanian workers work in the informal sector; 80 percent of MSMEs report competition from informal firms.
- Trade and FDI (Annex VIII highlights):
  - FDI trends: FDI rose to 23 percent of GDP in 2006, declined to averages near 1.5–2.5 percent of GDP in recent years; FDI in 2022 about $US1.3 billion (~2.5 percent of GDP).
  - Policy recommendations: facilitate private sector compliance with trade conformity requirements; improve trade logistics; further reduce FDI restrictions; pursue GVC integration and productivity-raising reforms.

### DEBT SUSTAINABILITY AND EXTERNAL SECTOR
- Public debt trajectory (Annex III, baseline):
  - 2023: 89.2 percent of GDP.
  - 2024: 90.5 percent of GDP.
  - 2025: 89.9 percent of GDP.
  - 2026: 88.1 percent of GDP.
  - 2027: 84.2 percent of GDP.
  - 2028: 79.6 percent of GDP.
  - 2029: 75.1 percent of GDP.
  - 2030: 70.9 percent of GDP.
- DSA assessment: debt is assessed to be sustainable, but risks remain from future shocks and sizable gross financing needs.
- Gross financing needs (selected):
  - Financing Gap (IMF staff projections, USD millions): 2,599 (2024); 2,193 (2025); 2,023 (2026); 1,656 (2027).
  - IMF EFF disbursement: 452 (2024); 262 (2025); 263 (2026); 263 (2027).
  - Identified official public external financing: 2,146 (2024); 1,931 (2025); 1,204 (2026); 733 (2027).
  - World Bank financing: 1,202 (2024); 1,034 (2025); 968 (2026); 654 (2027).
  - Memorandum item — Eurobond issuance or commercial borrowing: 0 (2024); 1,000 (2025); 1,000 (2026); 1,000 (2027).
- External sector:
  - Current account (percent of GDP): -7.8 (2019/2022 reference) to -3.7 (2023); projected -4.3 (2024) and -4.5 (2025) in various sections.
  - Exports of goods, f.o.b. ($ billions): "12.8 12.6 12.1 12.9 12.6 13.0 13.9 14.5 15.1 15.7".
  - Imports of goods, f.o.b. ($ billions): "24.4 23.0 22.3 22.8 23.3 23.8 25.8 27.5 28.4 29.6".
  - Gross usable international reserves (USD millions): "16,432 17,319 17,965 18,104 18,460 18,577 19,381 20,979 21,700 22,437".
  - Net international reserves (USD millions): "14,378 15,352 15,791 15,928 16,234 16,148 17,087 18,457 19,187 19,580".
- External DSA findings:
  - Public external debt: 42.2 percent of GDP (2023), 44.9 percent (2024), gradually declining toward 39.5 percent of GDP by 2029.
  - Gross external financing needs (USD billions): 5.0 (2023); 5.1 (2024); 5.1 (2025); 6.5 (2026); 7.2 (2027).

### PROGRAM IMPLEMENTATION, FUND RELATIONS, AND PERFORMANCE CRITERIA
- EFF access and phasing:
  - EFF Board approval: January 10, 2024 — SDR 144.102 million (242.0 percent of quota).
  - Second Review: October 1, 2024 — SDR 97.784 million (428.5 percent of quota).
  - Total access under EFF: 926.370 SDR million (270.0 percent of quota); Jordan's quota: SDR 343.1 million.
- Program monitoring and adjustments:
  - All end-June 2024 QPCs were met (central government primary deficit, combined public deficit, CBJ’s NIR, non-incurrence of external debt service arrears).
  - All SBs due by November 2024 were met; many ITs met with some revisions requested.
  - Authorities requested modification of end-December 2024 and end-June 2025 PCs for the central government’s primary deficit, combined public deficit, and CBJ’s NIR to reflect revised fiscal path and stronger reserve accumulation.
  - Completion of the second review supported by staff makes SDR 97.784 million available to Jordan.
- Program conditionality highlights (from TMU and MEFP):
  - Performance criteria include ceilings on central government primary deficit (ex grants and net transfers to NEPCO and water sector), ceiling on combined public deficit, floor on CBJ NIR, zero ceiling on accumulation of external debt service arrears.
  - Indicative targets on social spending (floor), public debt net of SSC holdings (ceiling), domestic payment arrears of NEPCO/WAJ (ceilings), and NDA of CBJ (ceiling).
  - Extensive data provision and reporting timetables specified for program monitoring (weekly to quarterly deadlines).

### STATISTICS, DATA MODERNIZATION, AND ANNEXED FINDINGS
- Department of Statistics (DoS) and data work:
  - DoS revised national accounts statistics; rebasing and inclusion of informal sector estimates underway.
  - DoS to compile annual expenditure approach of GDP by December 2026 and quarterly expenditure approach by December 2027.
  - ISTD and Customs entered into a data sharing agreement (met SB for September 2024); e-invoicing covering 95 percent of sales by value by mid-2024; SB to mandate 100 percent e-invoicing by March 2025.
- Financial soundness indicators (selected):
  - Nonperforming Loans/Total Loans (percent): 4.3 4.2 4.9 5.0 5.5 5.0 4.5 5.1 5.1 5.6 (2024 H1).
  - Coverage Ratio (percent): 77.9 75.4 79.3 69.3 69.5 71.5 79.9 81.5 75.6 73.1.
  - Capital Adequacy Ratio (percent): 18.5 17.8 16.9 18.3 18.3 18.0 17.3 17.9 17.9 17.6.
- Annexes and assessments:
  - Annex I: Implementation of Main 2022 Article IV Recommendations — fiscal, utility, monetary, AML/CFT, structural reforms progress.
  - Annex III: Debt sustainability analysis with baseline and stress tests; public debt projected to decline to just below 80 percent by 2028 under baseline.
  - Annex IV: External sector assessment — external position broadly in line with fundamentals; reserves above 100 percent of IMF ARA metric recommended to be maintained.
  - Annex V: FSSA implementation progress and FSAP-related items.
  - Annex VIII: Trade and FDI — policy recommendations to boost trade logistics, conformity capacity, and FDI.

*Italic: Source: EXECUTIVE SUMMARY and selected chapters and annexes — 1jorea2024003-print-pdf*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context and recent developments
- Jordan continues to show resilience and maintain macro-economic stability due to the authorities’ sound macro-economic policies and reforms.
- The conflict in the region (Gaza and Israel since October 2023, broadened to Lebanon in September 2024) is creating substantial headwinds, disrupting trade routes and affecting the economy more than anticipated at the outset of the program.
- Growth and sectoral patterns:
  - Growth projected to moderate to 2.3 percent in 2024 from 2.7 percent in 2023.
  - Domestic demand is subdued: consumption and investment slowing; declining activity in retail trade, services, and construction.
  - Net exports increased as imports slowed; exports (notably fertilizers and manufacturing) continue to grow in volume but less so in value due to lower global fertilizer prices.
  - Tourism receipts lower but holding up relatively well, with higher regional visitors partly offsetting a sharp decline in visitors from the U.S. and Europe.
- Labor market:
  - Unemployment rate: 21 percent.
  - Youth unemployment rate: 47.5 percent.
  - Female unemployment rate: 31 percent.
- Monetary and inflation outlook:
  - The Central Bank of Jordan (CBJ) is committed to monetary stability and the exchange rate peg to the U.S. dollar.
  - With low inflation and low inflation expectations, the CBJ has cut its policy rate in line with the U.S. Federal Reserve.
  - Inflation is expected to be around 2 percent in 2025.
- External position:
  - Current account deficit projected to widen slightly to about 4½ percent of GDP in 2024–25.
  - Gross usable international reserves projected to reach about US$18 billion by end-2024; reserve adequacy just over 100 percent of the Fund’s ARA metric.
  - Sovereign spreads narrowed to pre-conflict levels; Jordan’s credit rating was upgraded in 2024 (first upgrade in more than two decades).

### Program implementation and policy stance
- Program performance: All quantitative performance criteria (PCs) and structural benchmarks (SBs) for the second review were met.
- Authorities’ commitments:
  - Resume gradual fiscal consolidation with the 2025 budget to strengthen sustainability and further improve public utilities’ finances.
  - CBJ to safeguard the exchange rate peg and take policy actions to maintain monetary and financial stability.
  - Structural reforms focused on enhancing the business environment and competition, increasing labor market flexibility, and raising female labor participation.
- Article IV consultation priorities:
  - Maintain macro-economic stability and strengthen resilience while achieving stronger and inclusive growth.
  - Fiscal policy: pursue gradual fiscal consolidation to reduce public debt to below 80 percent of GDP by 2028 while creating space for priority social spending and investment.
  - Improve efficiency of public utilities to reduce their fiscal burden and improve services.
  - Monetary policy: remain focused on preserving the peg and maintaining low inflation.
  - Accelerate structural reforms to foster a more dynamic private sector and generate more jobs.
- Second EFF review:
  - Staff supports completion of the second review and modification of PCs for the central government’s primary deficit and the combined public deficit to reflect the impact of the conflict, and modification of the CBJ’s net international reserves PC to reflect stronger performance to date.
  - Upon completion, a disbursement of SDR 97.784 million will be made available to Jordan.

### Outlook and risks
- Near-term growth:
  - Growth in 2025 projected at around 2.5 percent, assuming the conflict continues through 2025 without further escalation.
  - A projected further increase in exports of minerals and manufacturing would allow a slight uptick from 2024; domestic demand expected to remain subdued.
  - Growth projected to pick up in later years assuming conflict resolution and continued policy and reform progress.
- Risks (Annex II):
  - Downside risks include further escalation of the conflict, deeper geoeconomic fragmentation, a slowdown in global growth, commodity price volatility, and climate-change risks (notably water scarcity).
  - Social tensions could rise if the conflict escalates.
  - Upside risks include an early resolution of the conflict, faster global easing of interest rates, stronger global growth, and accelerated reform implementation.
- Box 1 — Downside scenario:
  - Assumes further escalation; first half of 2025 severely impacted.
  - Growth would fall close to 2 percent in 2024 (vs. 2.3 percent baseline) and to 1.8 percent in 2025 (vs. 2.5 percent baseline); recovery delayed with growth just over 2 percent in 2026 and rebound to slightly above 3 percent only in 2027.
  - Revenues would weaken by about 1 percent of GDP in 2025–27 absent policy changes.
  - Additional security and social assistance needs estimated at about 0.5 percent of GDP per year.
  - To preserve debt sustainability under the adverse scenario, additional revenue measures of about 0.5 percent of GDP per year are assumed, slower capital spending, and curtailment of non-priority spending; the 80 percent debt-to-GDP target would be delayed to 2030.
  - Financing needs would be larger by some 3 percent of GDP over 2025–27; additional development partner support would be needed.

### Fiscal policy: past progress and near-term priorities
- Progress since the pandemic:
  - Public debt reached close to 90 percent of GDP at end-2023 (from 74.3 percent of GDP in 2018) following external shocks and financial losses of public utilities.
  - Central government primary deficit more than halved from 5.7 percent of GDP in 2020 to 2.7 percent of GDP in 2023.
  - General government primary deficit (excluding grants) reduced from 4.5 percent of GDP in 2020 to 1.4 percent of GDP in 2023.
  - Improvements achieved through revenue mobilization (broadening the tax base and strengthening tax administration), containing current spending (removing fuel subsidies and rationalizing food subsidies), and expanding the social safety net.
- Near-term stance:
  - This year’s budget deficit will remain broadly unchanged due to revenue measures and some spending cuts.
  - Authorities committed to resuming gradual fiscal consolidation with the 2025 budget and improving finances of public utilities.
  - Need to protect growth and the poor while placing public debt on a steady downward path.

### Monetary and financial policies
- CBJ stance:
  - Continue to safeguard the exchange rate peg to the U.S. dollar.
  - Take any policy actions necessary to maintain monetary and financial stability.
  - Policy rate adjustments have followed the U.S. Federal Reserve easing cycle given low inflation and expectations.

### Structural reforms and inclusiveness
- Focus areas:
  - Enhancing the business environment and competition.
  - Increasing labor market flexibility and female labor participation.
  - Improving access to finance and private sector dynamism to generate more jobs.
- Importance:
  - Accelerating reforms is essential to achieve stronger growth over the medium term and avoid permanent scarring from the current shocks.

### Institutional and mission details
- New government took office on September 15, 2024; it affirmed commitment to macro-economic stability, debt sustainability, and accelerating reforms under Jordan’s Economic Modernization Vision.
- IMF mission and consultations:
  - Discussions held in Amman during September 30–October 10, 2024.
  - Mission team included Ron van Rooden (head), Fei Liu, Nora Neuteboom, Annalaura Sacco (all MCD), Yahia Said (Resident Representative), Rayah Al-Farah, Leen Aghabi (local economists), Lahcen Bounader, Christoph Freudenberg (both FAD), Alice Fan (SPR), and Lisbeth Rivas (STA). Maya Choueiri (OED) participated in the mission.

*Source: EXECUTIVE SUMMARY — 1jorea2024003-print-pdf*

### 9. Fiscal policy needs to stay the course with a gradual fiscal consolidation to reduce

### 9. Fiscal policy needs to stay the course with a gradual fiscal consolidation to reduce public debt and strengthen medium-term sustainability, while creating space for priority social spending and investment

### Fiscal consolidation strategy and objectives
- Authorities committed to reducing public debt to 80 percent of GDP by 2028, mindful of large debt service obligations in the coming years.
- Emphasis on revenue mobilization through high-quality and durable revenue measures and improving spending efficiency—including improving the efficiency of the public utilities—since scope for curtailing current spending is limited in the near term.
- Social assistance needs remain high as donor support to shoulder the cost of hosting refugees has been declining.

### 2024 fiscal outcomes, shocks, and policy responses
- Government revenues significantly impacted by weaker domestic demand and a sharper-than-expected drop in prices of key export commodities, requiring recalibration of fiscal targets.
- Revenues faced a shortfall of about 1½–1¾ percent of GDP in 2024, reflecting:
  - lower sales taxes and customs duties due to lower consumption (and imports) and tourist spending because of the longer duration and intensification of the conflict (about 0.8 percent of GDP);
  - lower profit taxes and royalties due to a sharper decline in global fertilizer prices (about 0.5 percent of GDP); and
  - lower sales and fuel taxes due to an accelerating shift to electric vehicles (about 0.5 percent of GDP).
- Decline in activity and incomes led to expanded social support by increasing the number of households covered by the National Aid Fund (NAF).
- To limit the 2024 budget deficit impact, authorities:
  - curtailed capital spending by over 1 percent of GDP; and
  - raised taxes on electric vehicles and e-cigarettes effective mid-September, expected to yield almost 0.2 percent of GDP in 2024.
- With these measures the authorities are expected to contain the central-government primary deficit (excluding grants and transfers to public utilities) to 2.9 percent of GDP in 2024 (MEFP ¶6), broadly unchanged from last year’s deficit but 0.8 percent of GDP higher than the deficit targeted under the program.
- Together with measures to limit utilities’ operational losses and continued surpluses of the SSC, the overall general government primary deficit (excluding grants) is expected to remain broadly unchanged in 2024, at 1.3 percent of GDP, compared to 1.4 percent in 2023.
- Public debt is expected to be contained at just over 90 percent of GDP by end-2024.

### Refugee-related fiscal pressures (Box 2) — key facts and implications
- As of September 2024:
  - 621,000 Syrians registered with UNHCR;
  - Total registered refugee population (including refugees from Iraq, Yemen, Sudan, Somalia) 689,000;
  - 2.3 million Palestinian refugees under the UNRWA mandate.
- Over 82 percent of registered refugees live within host communities; about half of the refugee population are working-age adults (aged 19-59); approximately 5 percent are elderly (aged 60 and above); gender distribution is almost even.
- Nearly 447,000 work permits have been issued to refugees as of September 2024; more than 90,000 permits were issued in 2023 (MOPIC, September 2024). Since July 2024, expiration of the work permit fee waiver resulted in a sharp decline in renewals, with only 1,227 work permits issued between July and September 2024.
- Donor support declined sharply: in 2023 Jordan received only 29 percent of its budgetary needs for the Syrian response. UNHCR reduced cash assistance by 20 percent in April 2024 (reversed in July with some funding). The World Food Program suspended assistance for about 100,000 refugees and reduced by 30 percent assistance levels for the remaining 310,000 refugees, providing only US$21 per person per month.
- As of mid-October 2024, the Jordanian government had received less than 40 percent of the amount received in 2023, exacerbating poverty and food insecurity among refugees.
- The decline in donor support underscores the urgency of mobilizing sustained international assistance and investing in refugee education and vocational training to improve self-sufficiency.

### Medium-term fiscal plans (2025–28) and key measures
- Authorities submitted a central government budget for 2025 consistent with a reduction in the primary deficit (excluding grants and transfers to the utilities) by 0.9 percent of GDP.
- 2025 budget assumptions and revenue measures:
  - Based on conservative revenue projections assuming the conflict continues but does not further escalate.
  - Incorporates 1 percent of GDP in revenue-enhancing measures, including:
    - increase in taxation of electric vehicles and e-cigarettes (0.8 percent of GDP);
    - deferral of a further reduction in customs tariffs (0.15 percent of GDP); and
    - collection of tax arrears (0.1 percent of GDP).
- Continued revenue collection improvements (MEFP ¶8) to include:
  - further digitalization (e-invoicing, SB for March 2025);
  - expanding application of new transfer pricing rules;
  - combating smuggling with track-and-trace systems for alcohol and tobacco, and biochemical markers for fuel products (met SB for November 2024);
  - strengthening compliance management by shifting fully to a risk-based approach;
  - improved cooperation between tax and customs administration (met SB for September 2024);
  - streamlining customs clearing processes (met SB for September 2024).
- Fiscal projections and targets with measures to improve utilities’ finances and continued SSC surpluses:
  - The overall general government primary deficit (excluding grants) will be reduced by 1.1 percent of GDP to 0.2 percent of GDP in 2025 and public debt will decline to just below 90 percent of GDP.
  - Authorities plan continued steady fiscal consolidation in 2026–28, with a continued annual fiscal adjustment by the central government of about 0.9–1 percent of GDP.
  - With improvements in public utilities’ finances, the general government primary balance (excluding grants) is projected to move from a deficit of 0.2 percent of GDP in 2025 to a surplus of about 3 percent of GDP in 2028.
- Authorities will design and adopt a Medium-Term Revenue Strategy (MTRS), with IMF technical support (new SB for September 2025).
- Authorities will contain growth of the civil service wage bill and advance a Public Sector Reform Roadmap to improve public administration efficiency.

### Debt sustainability and risks
- Debt sustainability analysis (Annex III) indicates public debt is assessed to be sustainable.
- Risks remain from future shocks and sizable gross financing needs; commitment to sound macroeconomic policies, development partners’ commitment to Jordan, and continued market access are cited as important safeguards.

### Structural fiscal reforms and public financial management
- Measures to avoid arrears accumulation:
  - Budgetary spending units’ electricity payments to be made directly by the Ministry of Finance’s treasury department.
  - Spending units required to seek approval from the General Budget Department prior to issuing a commitment voucher to enter into new commitments.
  - Authority to grant healthcare exemptions centralized; new pricing rules to be introduced for medical services provided to those covered by exemptions (new SB for May 2025).
- Continued rollout and strengthening of Jordan’s National E-Procurement System (JONEPS) and linkages with the Government Financial Management Information System.
- Public investment management strengthened: all capital projects included in the 2025 budget were approved by the Public Investment Management unit and registered in the National Registry of Investment Projects, in line with the recently adopted project management circular (met SB for September 2024).
- The Ministry of Finance’s Macro-Fiscal Unit prepared the 2024 Fiscal Risk Statement, expanding coverage of contingent liabilities of the SOE sector.
- Authorities will develop and adopt a State-Owned Enterprise (SOE) ownership policy by the Spring of 2026 (new SB for March 2026).

### Electricity sector: financial position and reform actions
- Utilities’ sector losses in 2023 (NEPCO, WAJ, and water distribution companies) reached 1.8 percent of GDP.
- NEPCO’s outlook: improved network reliability and more diversified generation, but constrained near-term financial improvement due to long-term contractual obligations, costly power purchase agreements, guaranteed returns for distribution companies, and high electricity tariffs relative to regional peers.
- Reforms and measures to strengthen NEPCO and electricity sector efficiency (MEFP ¶16 and ¶17):
  - Cost saving and revenue measures adopted in late 2022 have facilitated higher bulk tariffs charged by NEPCO; an additional legally and regulatory permissible levy on power generation becomes effective at the start of 2025.
  - Time-of-use tariffs rolled out beginning in July 2024, capturing 15 percent of electricity consumption (met SB for July 2024), with plans to capture 30 percent by January 2025 (SB for January 2025) and all sectors, including household, by September 2026 (new SB for September 2026).
  - Installation of smart meters for the residential sector planned to be completed by end-2025 (new SB for June 2026).
  - Renewable Energy Law amended to switch from net metering to net billing for new self-generators effective September 2024 (met SB for September 2024).
  - Action plan (met SB for October 2024) to optimize conventional and renewable power purchase agreements; reduce technical losses of distribution companies from 12 percent to 9 percent; and reduce operational costs to allow NEPCO to further raise bulk tariffs.
  - Steady progress in clearing NEPCO’s stock of arrears, with ITs for NEPCO’s domestic payment arrears for end-June and end-September 2024 met.

### Water sector: finances, losses, and investments
- Jordan faces severe water scarcity; a multi-year plan to raise water tariffs was adopted to aim at covering operating and maintenance costs by 2030.
- First tariff increase of 4.6 percent came into effect in December 2023; a second increase to be implemented in December 2024.
- Non-revenue water (NRW) reduced by over 5 percent since mid-2022, to 47 percent; authorities committed to an annual reduction of 2 percent, targeting:
  - NRW of 37 percent by 2030; and
  - NRW of 25 percent by 2040.
- Sector losses in the first half of 2024 were in line with projections; expected to reach 0.6 percent of GDP in 2024 and to slowly decline to 0.2 percent of GDP by 2028.
- Progress in reducing sector arrears includes timely cash transfers from the Ministry of Finance to WAJ, although ITs for end-June and end-September 2024 for the distribution companies’ arrears were missed.
- Major investment: Aqaba-Amman Conveyance project to pump desalinated seawater to Amman — preferred bidder selected and discussions expected to be finalized by the end of 2025, with the project aimed to become online by the end of 2029.

### Monetary and financial policies
- Central Bank of Jordan (CBJ) has maintained monetary stability, safeguarded the peg with the U.S. dollar, and maintained adequate reserve buffers.
- Deposit dollarization reached just under 18 percent, the lowest level since 2017.
- Private sector credit growth slowed to just over 2 percent by mid-2024, picking up to over 3 percent by September 2024.
- With the U.S. Federal Reserve expected to continue to gradually lower its policy rate, credit growth is expected to continue to pick up gradually.
- Jordan’s external position is assessed as broadly in line with fundamentals (Annex IV); reserve adequacy remains at around 100 percent of the Fund’s ARA metric.
- Gross usable reserves exceeded US$18 billion by end-October 2024; end-June and end-September 2024 targets for net international reserves (NIR) and net domestic assets were met with considerable margins.

*Source: IMF staff report chapter: 9. Fiscal policy needs to stay the course with a gradual fiscal consolidation to reduce public debt and strengthen medium-term sustainability*

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

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

### Monetary policy stance and reserves
- The CBJ will continue to follow the Federal Reserve’s policy decisions, while remaining vigilant to changes in global financial conditions, and stands ready to undertake any policy adjustments necessary to safeguard monetary and financial stability, and to maintain adequate reserve buffers. (MEFP ¶10)
- NIR targets for the rest of 2024 and 2025 have been revised upwards to reflect the stronger outcomes through end-September, while leaving room to deal with the high level of uncertainty.
- To improve monetary transmission, the authorities aim to develop a secondary market for local government debt, starting with an assessment of the building blocks for an active local currency bond market. (MEFP ¶15)
- The CBJ is gradually reducing the concessionality of its subsidized lending facility; two lending schemes expired in 2023, and the remaining scheme will see an initial increase of 50 basis points of the interest rate on new loans issued under the scheme as soon as the regional conflict subsides. The CBJ should aim to phase the scheme out, as it complicates monetary policy transmission. (MEFP ¶10)

### Banking system health and supervision
- The banking system’s capital adequacy ratio (CAR) remains well above the regulatory minimum of 12 percent. (MEFP ¶11)
- Non-performing loans (NPL) remain broadly stable and relatively low, with a slight uptick recently reflecting the slowdown in economic activity and some loan reclassifications.
- The CBJ has maintained prudent provisioning standards in line with IFRS9’s forward-looking expected loss approach and will continue to closely monitor banks’ financial health.
- Latest stress test results indicate the Jordanian banking sector—both at the level of bank branches in Jordan and at the consolidated level (bank branches and subsidiaries inside and outside Jordan)—is assessed to be broadly able to withstand shocks even under the most severe scenario.

### Implementation of FSSA recommendations and crisis preparedness
- Progress on the 2023 joint IMF-World Bank Financial System Stability Assessment (FSSA):
  - CBJ aligned prudential requirements on asset classification with Basel Core Principles (BCPs) (met SB for June 2024).
  - Multi-agency crisis management committee (CBJ, Ministry of Finance, JODIC) meets twice per year to coordinate crisis preparedness and management.
  - CBJ strengthened the role of the Financial Stability Committee (FSC), expanded membership, refocused FSC on macroprudential policies and systemic risks, started monitoring Liquidity Coverage Ratio (LCR) by significant currencies, and is analyzing FX liquidity separately from total liquidity.
  - CBJ has collected and will continue to collect additional data for more comprehensive financial stability analyses. (MEFP ¶12 and Annex V)

### Planned financial sector strengthening (SB timelines preserved)
- The CBJ will further strengthen financial sector resilience by:
  - (i) introducing Pillar 2 risk assessment methodologies to make capital assessments more sensitive to individual banks’ risk profiles (SB for November 2025);
  - (ii) aligning prudential requirements for concentration risk and related party exposure with BCPs, with technical assistance from IMF’s Monetary and Capital Markets Department (SB for November 2026);
  - (iii) designing and operationalizing procedures for the compensation of depositors together with the Jordan Deposit Insurance Corporation (JODIC) (SB for November 2026).
- Following removal from the FATF gray list in October 2023, authorities will continue to enhance the AML/CFT framework, including strengthening risk-based AML/CFT supervision and increasing international cooperation. (MEFP ¶13)

### Access to finance for MSMEs and development finance rationalization
- MSMEs are mostly self-financed, limiting their ability to invest and expand; banks mainly serve larger corporates and the state. (Annex VI; MEFP ¶14)
- A comprehensive review of development finance initiatives is being conducted to rationalize the number of initiatives and strengthen their governance.
- Authorities have made corporate credit reports easily accessible through digital channels and will continue to enhance data collection by the Credit Bureau.

### Structural reforms to boost growth and job creation
- Structural reform priorities to support the Economic Modernization Vision and raise productivity:
  - Strengthen the business environment, enhance competition, and improve the investment climate (MEFP ¶19), including:
    - (i) amending the competition law to strengthen the authority of the Competition Department, provide administrative and financial independence, and enhance executive capacity (SB for October 2025);
    - (ii) continuing to streamline and reduce costs of registering and closing businesses;
    - (iii) abolishing licensing requirements for libraries, cultural and sport activities, and streamlining licensing for food, childcare, and private education sectors (met SB for September 2024);
    - (iv) easing restrictions and regulations in the transport and fuel sectors based on recent studies;
    - (v) digitalizing government services to improve delivery and reduce costs (SB for December 2025);
    - (vi) further relaxing restrictions on foreign ownership via bilateral negotiations and expediting approvals for full foreign ownership.
  - Enhance labor market flexibility and female labor force participation (MEFP ¶20), including:
    - (i) amending the Labor Law to increase flexibility and simplify hiring and firing, improve childcare provisions (SB for September 2025);
    - (ii) amending the Social Security Law to harmonize benefit rights for males and females in an actuarily neutral way, facilitate flexible work arrangements, and mutualize unemployment insurance by replacing the current individual-account program with risk pooling (SB for September 2025);
    - (iii) issuing bylaws to formalize social and care work, streamline licensing for nurseries, extend working hours, and simplify registration for home-based nurseries;
    - (iv) reviewing work permit frameworks and regulations, including for high-skilled non-Jordanians;
    - (v) harmonizing public sector pay scales for men and women;
    - (vi) improving public transport services.
  - Further improve governance and transparency (MEFP ¶21), including:
    - (i) criminalizing illicit gains from public procurement;
    - (ii) requiring companies to disclose beneficial ownership information per the new beneficial owner registry regulations;
    - (iii) continuing roll-out of the electronic system for public procurement.

### Statistics and data modernization
- The Department of Statistics (DoS) has revised national accounts statistics, benefiting from better source data on government services.
- DoS is working to include improved estimates of the informal sector in GDP, rebase the national accounts, expand coverage of the producer price index, and update the consumer price index.
- The CBJ has expanded coverage of remittances and foreign investment data in balance of payments statistics and will include the survey of other financial corporations in monetary statistics.
- Authorities will continue to expand data sharing and coordination and are committed to further improving the timeliness and accuracy of economic data. (Annex IX and MEFP ¶22)

### Program modalities, financing, and performance criteria
- 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 (Germany, Japan, the U.S., and GCC countries).
- 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 continue to be used for budget financing.
- All PCs and SBs for the second review have been met, as were most ITs. Authorities request modification of the end-December 2024 and end-June 2025 performance criteria for:
  - the central government’s primary deficit,
  - the combined public deficit,
  - the CBJ’s net international reserves,
  to reflect the revised fiscal adjustment path and stronger reserve accumulation.
- The end-March and end-June 2025 ITs on domestic payment arrears of NEPCO have been revised upward to reflect a more realistic path for arrears clearance. (See Tables 1 and 2 of the attached MEFP.)

### External exposure, Fund repayment capacity, and financing tables
- Jordan’s capacity to repay the Fund remains adequate; risks include a deterioration in the external environment, domestic resistance to reforms, and administrative capacity constraints.
- The Fund’s exposure to Jordan is projected to remain moderate, with outstanding Fund credit peaking at:
  - 3.9 percent of GDP and 9.2   percent of exports of goods and services in 2024,
  - 11.5 percent of gross reserves in 2025,
  - 480 percent of quota in 2027, before gradually declining.
- Total debt service to the Fund will peak at 1.8 percent of exports of goods and services and 2.2 percent of gross reserves in 2024.
- Jordan: External Financing Gap and Funding, 2024–27 (In million of U.S. dollars) — financing gap and identified official public external financing:
  - Financing Gap: 2,599 (2024); 2,193 (2025); 2,023 (2026); 1,656 (2027)
  - IMF EFF disbursement: 452 (2024); 262 (2025); 263 (2026); 263 (2027)
  - Identified official public external financing: 2,146 (2024); 1,931 (2025); 1,204 (2026); 733 (2027)
  - World Bank: 1,202 (2024); 1,034 (2025); 968 (2026); 654 (2027)
  - European Union: 0 (2024); 22 (2025); 0 (2026); 0 (2027)
  - EIB: 127 (2024); 110 (2025); 0 (2026); 44 (2027)
  - Others 1/: 818 (2024); 567 (2025); 236 (2026); 35 (2027)
  - Unidentified official public external financing: 0 (2024); 0 (2025); 556 (2026); 60 (2027)
  - Memorandum Item — Eurobond issuance or commercial borrowing: 0 (2024); 1,000 (2025); 1,000 (2026); 1,000 (2027)
  - (Source: IMF staff projections.) 1/ Include bilateral and multilateral financing from Canada, France, Germany, Italy, Japan, Saudi Arabia, UAE, Islamic Development Bank and Asia Infrastructure Investment Bank.

### Staff appraisal and policy recommendations
- Staff assessment:
  - Jordan maintains macro-economic stability despite regional conflict headwinds, supported by the EFF arrangement and authorities’ policies; recent credit rating upgrades reflect policy credibility.
  - The intensifying conflict has moderated growth, kept unemployment high, and reduced government revenues.
- Fiscal policy:
  - The recalibration of the fiscal adjustment path is appropriate given the impact of the regional conflict; measures taken to offset current-year revenue losses and the 2025 budget submission demonstrate commitment to debt sustainability.
  - Strong efforts at broadening the revenue base are critical for sustained progress in revenue collection.
- Public utilities and climate-related investment:
  - Continued progress is needed to ensure financial viability and efficiency of power and water sectors; their financial losses add to public debt and reduce fiscal space.
  - Addressing climate change impacts will require substantial investments and efforts to reduce costs, improve efficiency, and generate additional revenues.
- Monetary policy and exchange rate:
  - Monetary policy should continue to focus on safeguarding monetary and financial stability. The CBJ should continue to adjust policy rates as needed to support the exchange rate peg and maintain low inflation, while phasing out its remaining preferential lending scheme.
  - The exchange rate peg remains an effective nominal anchor; Jordan’s external position is assessed to be in line with fundamentals.
  - CBJ should continue monitoring banks’ financial health and further strengthen financial sector oversight per FSSA recommendations.
- Structural reforms and international support:
  - Accelerate structural reforms to foster a dynamic private sector capable of generating more jobs; with population growing at about 2 percent per year, stronger growth is needed to reduce unemployment meaningfully.
  - Continued and timely international support is needed to help Jordan bear the costs of hosting refugees, face external headwinds, and meet development objectives, including climate change adaptation.
- Fund engagement:
  - Staff supports the authorities’ request for completion of the second review under the extended arrangement and supports the proposed modification of the end-December 2024 and end-June 2025 performance criteria to reflect the recalibrated fiscal adjustment path.

*Source: IMF staff projections.*

### 41. It is proposed that the next Article IV consultation with Jordan take place on a 24-month

### 1jorea2024003-print-pdf - 41. It is proposed that the next Article IV consultation with Jordan take place on a 24-month

### Article IV consultation cycle
- It is proposed that the next Article IV consultation with Jordan take place on a 24-month cycle, in accordance with the Decision on Article IV Consultation Cycles (Decision No. 14747-(10/96), as amended).

### Real sector developments
- Net exports are supporting growth.
- The sectors that contributed most to growth in 2024 Q2 were manufacturing, government services and agriculture.
- Inflation remains low and stable, and is driven mainly by recreation and rent.
- Labor market outcomes:
  - Youth unemployment remains high and female labor force participation low.
  - Overall, employment recovery has been heterogeneous across sectors.
- Selected chart notes and indicators (as presented):
  - Contribution to Growth (Percent, y-o-y): historical series plotted from 2018 Q1 through 2024 Q2 showing Net Exports, Other GDP components, and Growth.
  - Sectoral Contribution to GDP Growth (2024 Q2, percentage points): charted values shown around -0.1, 0.0, 0.1, 0.2, 0.3, 0.4, 0.5, 0.6.
  - CPI Inflation (Y-o-y): Core and Headline series through Aug '24.
  - Inflation By Sector (Pch y-o-y, August '24): sector labels include Transportation, Food, Recreation, Rents, Food and drinks, Other, Transportation, Restaurants & hotels, Fuel and lighting, Education, Household furnishing, Health, Clothing and footwear.
  - Change in Employment of Jordanians by Sector Q2 2023 - Q2 2024 (Percentage points): charted across sectors.
  - Labor Market Outcome (Percent of Jordanians): time series of Youth unemployment, Total unemployment, Female labor force participation from 2019 through 2024 Q2.

### Fiscal developments
- Domestic revenues in 2024 have stagnated at 2023 levels; tax revenues saw a strong rebound in April 2024 but have slowed since.
- Corporate income tax receipts slowed in 2024. Expenditures are estimated to remain flat in 2024.
- Public debt is projected to gradually decline.
- Despite new shocks, the fiscal path is projected to deliver the desired consolidation.
- Key fiscal figures and projections (selected, as presented):
  - Real GDP at market prices row: "2.6 2.7 2.4 2.3 2.9 2.5 3.0 3.0 3.0 3.0"
  - GDP deflator at market prices row: "2.6 1.8 2.3 2.1 2.3 2.3 2.5 2.5 2.5 2.5"
  - Nominal GDP at market prices (JD billions) row: "34.6 36.2 37.8 37.8 39.8 39.7 41.9 44.2 46.7 49.3"
  - Nominal GDP at market prices ($ billions) row: "48.8 51.0 53.3 53.3 56.1 55.9 59.1 62.4 65.8 69.5"
  - Consumer price inflation (annual average) row: "4.2 2.1 2.1 1.7 2.4 2.2 2.5 2.3 2.3 2.3"
  - Consumer price inflation (end of period) row: "4.4 1.6 2.3 1.8 2.4 2.2 2.5 2.3 2.3 2.3"
  - Unemployment rate (period average, percent) row: "1/22.9 22.0 ........................"
- Fiscal balances and debt (selected rows from Table 1):
  - Revenue and grants: "25.8 25.3 26.0 24.4 26.3 25.6 25.7 26.5 27.0 27.1" (percent of GDP)
  - Expenditure 2/: "31.6 30.4 31.5 31.0 31.8 31.3 30.6 29.4 28.6 27.6" (percent of GDP)
  - Overall central government balance 3/: "-5.8 -5.1 -5.6 -6.5 -5.5 -5.7 -4.9 -2.8 -1.5 -0.5" (percent of GDP)
  - Primary government balance (excluding grants): "-3.6 -2.7 -2.1 -2.9 -1.6 -2.0 -0.9 0.2 1.2 2.0" (percent of GDP)
  - Government and guaranteed gross debt 5/: "111.3 113.8 113.7 115.0 114.3 116.1 115.6 113.0 109.6 105.7" (percent of GDP)
  - Government and guaranteed gross debt, net of SSC's holdings 5/: "88.8 89.2 89.2 90.5 88.3 89.9 88.1 84.2 79.6 75.1" (percent of GDP)
- Table 2a (Central Government: Summary of Fiscal Operations, 2022–29, in JD millions) selected entries:
  - Total revenue and grants: "8,914 9,144 9,813 9,238 10,457 10,155 10,748 11,737 12,622 13,368"
  - Domestic revenue: "8,122 8,432 9,106 8,531 9,841 9,395 10,123 10,952 11,793 12,494"
  - Tax revenue, of which: "6,048 6,184 6,816 6,332 7,410 7,043 7,615 8,271 8,945 9,489"
  - Nontax revenue: "2,074 2,248 2,290 2,199 2,430 2,353 2,509 2,681 2,849 3,005"
  - Grants: "792 712 708 708 616 760 624 785 828 874"
  - Total expenditures, inc. other use of cash: "10,914 11,004 11,912 11,699 12,651 12,397 12,817 12,984 13,335 13,603"
  - Current expenditure: "9,752 9,627 10,304 10,499 10,778 11,036 11,352 11,431 11,694 11,872"
  - Wages and salaries: "1,849 1,953 2,090 2,090 2,145 2,145 2,241 2,309 2,424 2,546"
  - Interest payments: "1,477 1,703 1,995 2,068 2,160 2,190 2,320 2,111 2,097 2,104"
  - Capital expenditure: "1,162 1,378 1,608 1,200 1,873 1,361 1,466 1,553 1,641 1,731"
  - Overall central government balance at current policies: "-2,000 -1,860 -2,099 -2,461 -2,194 -2,242 -2,070 -1,246 -713 -234"
  - Financing (total): "2,204 1,872 2,099 2,461 2,194 2,242 2,070 1,246 713 234"
  - Foreign financing (net) 2/: "1,588 1,225 1,540 1,335 1,071 1,086 668 430 25 -513"
  - Domestic financing (net): "616 647 559 1,126 1,124 1,156 1,402 817 688 748"
  - Government and guaranteed gross debt (JD millions): "38,432 41,181 42,978 43,460 45,490 46,046 48,401 49,955 51,144 52,078"
  - Government and guaranteed gross debt, net of SSC's holdings (JD millions): "30,668 32,289 33,706 34,188 35,117 35,674 36,879 37,233 37,172 37,006"

### External sector developments
- The dollar peg and monetary tightening contributed to an appreciation of the real effective exchange rate.
- Growth slowdown and trade disruptions have narrowed the current account deficit in early 2024.
- After the surge in exports in 2022–23 driven by higher prices and volumes of fertilizers, export receipts have slowed as fertilizer prices have fallen sharply.
- Exports to GCC countries grew, marking deeper regional integration.
- Tourism receipts in 2023 surpassed pre-pandemic levels but are suffering in 2024 due to the conflict.
- Import growth slowed following the post-pandemic surge in prices, with fuel playing a key role.
- Selected external indicators (as presented):
  - Effective Exchange Rate Indices (3-month moving average, y-o-y growth, percent): U.S. NEER, NEER, REER plotted Dec-19 through Aug-24.
  - Exports to Select Markets (Nominal millions dinars): GCC, Iraq, India, China series plotted through Feb-24.
  - Key Merchandise Exports (3-month moving average, y-o-y growth, percent): Potash, Clothes, Phosphates series through Jul-24.
  - Merchandize Imports (In percent, 3-month moving average, y-o-y growth): series through Jul-24 disaggregated by Consumer goods (durable), Consumer goods (current), Intermediate and capital goods.
  - Current Account, 2019-24 (USD billions): components shown include Total exports, Travel receipt, Remittances, Public grants, Non-energy imports, Energy imports, Other items net, Current account.
  - Tourist Arrivals and Receipts (Percent of same month, 2019): Total receipt, Total arrival, Non-Jordanian Arab, Jordanians, non-Arab through Aug-24.

### Monetary and financial indicators
- Policy rates were adjusted in line with those of the U.S. Fed.
- Deposit and lending rates have also increased albeit more slowly and with margins narrowing.
- Banks’ liquidity conditions remain comfortable, but private sector credit growth has slowed.
- CBJ’s subsidized lending scheme remains stable. Ample reserves continue to keep dollarization down.
- Selected monetary and financial figures (as presented):
  - Interest Rates (In percent): multi-year series 2014–2024 for Re-Discount Rate, Overnight deposit, Main policy rate (one-week repo), Federal Funds Rate, Interbank rate, Overnight repo.
  - Deposit and lending rates series 2014–2024 for Deposit Rate, Interbank rate, Main policy rate, Prime lending rate.
  - Banks' JD Liquidity (Billions) series Feb-20 to Aug-24: detailed components 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), Private sector credit growth exc. refinery, Government credit to total assets (rhs) series 2014–2024.
  - CBJ Subsidized Lending Schemes (Amount extended in JD millions) series Aug-19 to Aug-24: "Actual take-up under all subsidized lending schemes" and "Lending to Jordan loan guarantee corporation".
  - Reserves and Dollarization: Deposit dollarization (In percent) and NIR ($bn, RHS) series 2014–2024.

### Selected economic indicators and macroeconomic outlook (Table 1 highlights)
- Current account balance (including grants), of which: "-7.8 -3.7 -5.0 -4.3 -4.0 -4.5 -4.7 -4.4 -4.1 -3.8" (percent of GDP)
- Exports of goods, f.o.b. ($ billions): "12.8 12.6 12.1 12.9 12.6 13.0 13.9 14.5 15.1 15.7"
- Imports of goods, f.o.b. ($ billions): "24.4 23.0 22.3 22.8 23.3 23.8 25.8 27.5 28.4 29.6"
- Oil and oil products ($ billions): "4.4 3.8 3.8 3.5 3.7 3.7 3.7 3.7 3.7 3.8"
- Private capital inflows (net): "2.4 1.4 1.5 1.6 2.0 2.1 3.0 3.3 3.6 3.6"
- Public grants and identified budget loans (excl. IMF): "6.5 5.8 7.6 7.1 5.2 6.3 4.4 3.6 2.3 1.8"
- Gross usable international reserves ($ millions): "16,432 17,319 17,965 18,104 18,460 18,577 19,381 20,979 21,700 22,437"
  - In months of prospective imports: "6.8 7.2 7.3 7.2 7.1 6.8 6.7 7.0 7.0 7.0"
  - In percent of reserve adequacy metric: "103 104 102 103 99 101 100 104 105 105"
- Net international reserves ($ millions): "14,378 15,352 15,791 15,928 16,234 16,148 17,087 18,457 19,187 19,580"
- Population (millions): "11.3 11.3 11.4 11.4 11.4 11.4 11.6 11.7 11.8 11.9"
- Nominal per capita GDP ($): "4,327 4,502 4,682 4,682 4,904 4,889 5,090 5,328 5,573 5,824"
- U.S. dollar per Jordanian dinar (period average): "1.41 1.41 1.41 1.41 1.41 1.41 1.41 1.41 1.41 1.41"
- Real effective exchange rate (end of period, 2010=100): "105.5 113.0 ........................"
  - Percent change (+=appreciation; end of period): "-1.3 7.1 ........................"

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

### 1. Central government primary balance (ex grants)-1,233-965-812-1,100-651-

### 1. Central government and general government fiscal balances (extract)

### Central government primary balance (ex grants)
- Levels: -1,233-965-812-1,100-651-812-37480555996
- (in percent of GDP): -3.6-2.7-2.1-2.9-1.5-2.0-0.90.21.22.0

### Central government primary balance (inc grants)
- Levels: -440.3    -253.3-104.3-392.5-34.5-52.5250.2864.8  1,383.7   1,870.0
- (in percent of GDP): -1.3-0.7-0.3-1.0-0.1-0.10.62.03.03.8

### Balance of utilities (NEPCO, WAJ, water distribution companies)
- Levels: -436-644-708-708-599-626-567-526-502-638
- (in percent of GDP): -1.3-1.8-1.9-1.9-1.5-1.6-1.4-1.2-1.1-1.3

### Combined public balance (1+3)
- Levels: -1,669    -1,609-1,520-1,808-1,250    -1,438-941-44653358
- (in percent of GDP): -4.8-4.4-4.0-4.8-3.1-3
.6-2.2-1.00.10.7

### SSC balance
- Levels: 8829031,0761,0761,1011,1011,1461,1481,1861,236
- (in percent of GDP): 2.62.52.82.82.82.82.72.62.52.5

### General government primary balance (ex grants) (4+5)
- Levels: 1/-642-519-203-491127-615081,0311,5921,975
- (in percent of GDP): -1.9-1.4-0.5-1.30.3-0.21.22.33.44.0

### General government primary balance (inc grants)
- Levels: 150.5192.3504.5216.3743.3698.5   1,132.6   1,816.2  2,420.6   2,848.8
- (in percent of GDP): 0.40.51.30.61.91.82.74.15.25.8

### General government overall balance
- Levels: -1,184    -1,331-1,287-1,649-1,192    -1,266-931-26571,118
- (in percent of GDP): -3.4-3.7-3.4-4.4-3.0-3.2-2.20.01.42.3

*Source: 1jorea2024003-print-pdf - 1. Central government primary balance (ex grants)-1,233-965-812-1,100-651-*

### 9. General government balance excluding grants -2,014    -2,073-2,025-2,386-1,785    -2,004    -1,510-728-93194

### 1jorea2024003-print-pdf - 9. General government balance excluding grants -2,014    -2,073-2,025-2,386-1,785    -2,004    -1,510-728-93194

### Fiscal balances and public debt
- General government balance excluding grants (levels, in millions): -2,014    -2,073 -2,025 -2,386 -1,785    -2,004    -1,510 -728 -931 94
- General government balance excluding grants (in percent of GDP): -5.8 -5.7 -5.4 -6.3 -4.5 -5.1 -3.6 -1.6 -0.2 0.4
- Consolidated debt of general government (levels, end-period, in millions): 30,668   32,289 33,706    34,188 35,117   35,674   36,879 37,233   37,172 37,006
- Consolidated debt of general government (in percent of GDP): 88.8 89.2 89.2 90.5 88.3 89.9 88.1 84.2 79.6 75.1
- Unconsolidated debt of general government (levels, in millions): 38,490   41,181 42,978    43,460 45,490   46,046   48,401 49,955   51,144 52,078
- Unconsolidated debt of general government (in percent of GDP): 111.4 113.8 113.7 115.0 114.3 116.1 115.6 113.0 109.6 105.7
- Nominal GDP at market prices (levels, in millions): 34,544   36,187 37,793    37,797 39,784   39,665   41,877 44,211   46,676 49,278

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

### NEPCO: Operating balance and financing (2022–29)
- NEPCO Revenues (of which Electricity sales), levels (in JD millions): Revenues 1,361 1,414 1,414 1,455 1,455 1,515 1,516 1,577 1,622 1,652 1,680; Electricity sales 1,334 1,385 1,385 1,408 1,408 1,468 1,469 1,525 1,566 1,593 1,620
- NEPCO Expenses (levels): 1,594 1,823 1,823 1,952 1,952 1,957 1,984 2,014 2,037 2,068 2,097
  - Purchase of electricity: 1,458 1,610 1,610 1,655 1,655 1,645 1,672 1,675 1,673 1,680 1,682
  - Depreciation: 323 323 2333 3333 3333333333 (as presented)
  - Interest payments 1/: 116 164 164 212 212 240 240 267 292 316 343
- Additional measures: 00 30 30 30 30 30 30 30 30 (as presented)
- NEPCO Operating balance (QPC) (levels, in JD millions): -233 -409 -409 -497 -497 -412 -439 -407 -385 -386 -388
- NEPCO Operating balance (percent of GDP): -0.7 -1.1 -1.1 -1.3 -1.3 -1.0 -1.1 -1.0 -0.9 -0.8 -0.8
- Total net domestic financing (levels): 233 409 409 497 497 412 439 407 385 386 388
  - Banks: 487 425 425 530 530 507 474 467 385 386 388
  - Loans and bonds: 395 655 655 530 530 507 474 467 385 386 388
  - Overdrafts: 92 -118 -118 0 0 0 0 0 0 0 0
- Outstanding loans and bonds (stocks, end-of-period): 3,124 3,779 3,779 4,341 4,341 4,943 4,850 5,377 5,762 6,149 6,536
- Total payables (levels): 2,834 2,441 2,441 2,408 2,408 2,313 2,373 2,313 2,313 2,313 2,313
  - Payables to government 3/: 2,009 1,789 1,789 1,789 1,789 1,789 1,789 1,789 1,789 1,789 1,789
  - Payables to private sector: 824 652 652 619 619 524 584 524 524 524 524
  - Of which: Increase in arrears: 44 -16 -16 -3 -3 -33 -95 -35 -6 0 0
- Memorandum: Brent oil prices (USD per barrel): 96 81 79 78.6 74 74 71 69 68 68

*Notes from table: 1/ Interest payments exclude interest on account payables to the government. 2/ Includes changes in accounts receivable, depreciation, project expenditures, and other items. 3/ Payables to the government include transfers from the government to NEPCO; they are excluded from the computation of the stock of arrears.*

### Consolidated Water Sector (2022–29)
- Total Revenues (inc. Grants): 300 337 337 365 365 400 400 444 480 519 638
  - Water Sales 1/: 181 225 225 242 242 262 262 289 305 321 413
- Expenditure 2/: 333 377 377 383 383 392 392 405 417 429 594
  - Electricity Expenses: 128 134 134 135 135 137 137 142 147 150 157
  - Salaries, wages and allowances: 66 82 82 83 83 85 87 89 92 94
  - Disi Water Purchases: 67 68 68 68 68 69 69 71 73 74 76
  - Samra Water Purchases: 24 43 44 44 44 47 47 49 52 56 59
  - Interest payments: 33 30 30 27 27 28 28 29 30 31 32
- Operating balance (QPC): -33 -40 -40 -18 -18 7 7 39 62 91 144
- Capital Expenditure: 150 195 195 183 183 185 185 189 193 197 285
- WAJ Overall balance (levels): -192 -227 -227 -247 -247 -241 -241 -181 -153 -133 -344
- Overall balance Consolidated Water Sector 4/: -203 -235 -235 -211 -211 -187 -187 -160 -141 -116 -251
- Total net financing: 203 235 235 211 211 187 187 160 141 116 251
  - Grants: 38 30 30 30 30 -23 -23 -45 -59 -79 50
  - Transfers from Central Government 5/: 169 205 205 213 213 182 182 176 170 164 169
  - Loans (net borrowing): 21 30 30 27 27 28 29 30 31 32
- Outstanding loans, of which (levels): 2,027 2,262 2,262 2,502 2,502 2,712 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: 385 415 415 442 442 470 470 499 528 559 591
- Effective interest rate (in percent): 1.6 1.5 1.5 1.2 1.2 1.1 1.1 1.1 1.0 1.0 1.0

*Notes: 1/ Water Sales includes the combined sales of WAJ and the Water Distribution Companies: Yarmouk, Miyahouna, and Aqaba. 2/ Including other expenses such as pensions. 4/ The consolidated balance of the distribution companies and WAJ, which substracts amortization payments of WAJ and adds losses of Karaq, Tafila, Maan, and Balqa. 5/ Information from the Ministry of Finance.*

### Balance of Payments and external financing (summary, 2022–29)
- Current account (CA) (levels, in USD millions): -3,820 -1,913 -2,657 -2,268 -2,217 -2,514 -2,759 -2,713 -2,704 -2,621
  - Current account (percent of GDP): -7.8 -3.7 -5.0 -4.3 -4.0 -4.5 -4.7 -4.4 -4.1 -3.8
  - Current account ex-grants (percent of GDP): -11.7 -7.0 -8.0 -7.3 -6.4 -7.3 -7.0 -6.8 -6.0 -5.6
  - CA ex-grants and energy imports (percent of GDP): -2.6 0.6 -0.8 -0.8 0.1 -0.8 -0.9 -0.9 -0.4 -0.1
- Trade balance (USD millions): -11,578 -10,380 -10,208 -9,905 -10,674 -10,781 -11,934 -12,976 -13,232 -13,840
  - Exports f.o.b.: 12,798 12,570 12,103 12,907 12,578 12,982 13,852 14,495 15,138 15,727
  - Imports f.o.b.: 24,376 22,950 22,311 22,812 23,252 23,762 25,787 27,470 28,370 29,567
    - Energy imports: 4,422 3,843 3,809 3,451 3,664 3,684 3,651 3,652 3,703 3,790
    - Non-energy imports: 19,954 19,107 18,502 19,361 19,587 20,078 22,135 23,818 24,667 25,777
- Travel receipts (levels): 5,816 7,410 7,207 7,041 8,031 7,390 8,243 8,748 9,335 9,885
- Current transfers (net): 5,974 5,297 5,562 5,562 5,433 5,618 5,619 5,897 5,798 5,840
  - Public grants: 1,861 1,641 1,595 1,616 1,389 1,592 1,401 1,515 1,242 1,242
  - Remittances: 3,107 3,151 3,212 3,252 3,284 3,324 3,503 3,658 3,822 3,856
- Capital and financial account (levels): -81,635 1,008 1,047 1,098 1,153 1,938 2,690 3,159 3,012 2,929 (as presented)
- Overall balance (levels): -2,950 -758 -1,649 -1,220 -1,119 -1,361 -821 -234 553 91
- Financing (levels): 2,950 758 1,649 1,220 1,119 1,361 821 23 -455 -391
  - Reserves (+ = decrease): 744 -434 -636 -775 -495 -273 -1,004 -1,398 -471 -137
  - Program financing (+ = increase): 1,859 1,262 2,635 2,345 1,964 1,984 1,826 1,422 16 -254
    - Official budget support: 1,335 1,327 2,438 2,146 1,912 1,931 1,760 1,393 276 0
    - World Bank: 468 579 1,310 1,202 640 1,034 968 654 232 0
    - Bilateral and other multilateral loans: 866 748 1,128 945 865 897 236 794 40 0
  - IMF (net), of which: 525 -6 519 719 852 536 529 -260 -254 (presentation truncated)
    - IMF disbursement: 525 324 514 532 602 622 632 630 0

*Memorandum items: Gross reserves (USD millions): 18,190 19,081 19,716 19,855 20,211 20,128 21,132 22,531 23,001 23,138. Current account (percent of GDP) series as above.*

### External financing requirements and sources (highlights)
- Gross financing requirements (USD millions): 7,826 4,515 4,684 5,316 4,947 5,927 6,427 6,388 6,460 5,908 5,053
- Change in reserves (+ = increase) (USD millions): -744 434 434 636 775 495 273 -1,004 -1,398 471 137
- Gross financing sources (USD millions): 4,345 4,158 4,239 3,063 3,122 4,250 4,506 5,369 6,202 6,103 5,190
  - FDI, net: 1,269 780 780 770 821 1,014 1,115 1,672 1,838 2,052 2,281
  - Public grants: 1,861 1,624 1,641 1,595 1,616 1,389 1,592 1,401 1,515 1,242 1,242
  - Public sector borrowing (excl. official budget support): 641 646 646 517 522 487 492 419 812 412 412
- (1)+(2)-(3)-(4) Total financing needs (USD millions): 1,859 1,359 1,359 2,888 2,599 2,171 2,193 2,023 1,656 276 0
  - Official public external financing equals above totals for identified years.

### Foreign exchange needs and sources (general government)
- General Government Gross Needs (USD millions): 4,755 3,694 3,694 2,512 2,438 4,099 4,007 4,351 3,571 3,736 2,252
  - NEPCO energy imports: 987 841 841 791 821 745 778 773 764 765 761
  - Net interest payments: 390 397 397 656 552 749 625 605 221 309 300
  - Amortization of external debt 1/: 2,478 1,130 1,130 1,064 1,064 2,321 2,321 2,228 2,232 1,962 1,190
- General Government Sources (USD millions): 4,327 4,850 4,868 2,562 2,591 3,418 3,629 3,827 3,944 3,604 1,654
  - Public grants: 1,861 1,624 1,641 1,595 1,616 1,389 1,592 1,401 1,515 1,242 1,242
  - Public sector borrowing: 1,166 651 651 967 976 746 754 682 1,075 412 412
  - Sovereign bonds: 650 1,250 1,250 0 0 1,000 1,000 1,000 1,000 1,250 0
- (3)=(2)-(1) General Government Balance (USD millions): -427 1,157 1,174 501 54 -680 -378 -524 373 -133 -598
- Financing under the EFF (USD millions): 1,335 1,327 1,327 2,438 2,146 1,912 1,931 1,760 1,393 276 0
- (5)=(3)+(4) General Government Balance under the EFF (USD millions): 907 2,484 2,501 2,488 2,300 1,231 1,553 1,236 1,765 143 -598
- CBJ Balance under the EFF (USD millions): 476 -434 -434 -636 -775 -495 -273 -1,004 -1,398 -471 -137
- (7)=(5)+(6) Public Sector Net Balance (USD millions): 1,383 2,050 2,067 1,853 1,526 736 1,281 232 367 -328 -735

### Monetary aggregates and Central Bank (2022–29 highlights)
- Broad money (levels, JD millions): 41,672 42,635 42,635 44,662 44,531 47,015 46,733 49,338 52,089 54,993 58,059
  - Currency in circulation: 6,037 5,808 5,808 6,017 5,999 6,263 6,226 6,499 6,783 7,078 7,386
  - Jordanian dinar deposits: 28,985 30,230 30,230 31,609 31,517 33,212 33,014 34,914 36,925 39,050 41,298
  - Foreign currency deposits: 6,649 6,597 6,597 7,036 7,016 7,539 7,494 7,925 8,382 8,864 9,374
- Net foreign assets (Monetary survey, JD millions): 6,910 7,723 7,723 8,574 8,671 9,491 9,430 10,096 11,067 11,585 11,862
- Net claims on general government (JD millions): 15,437 16,478 16,478 16,568 17,135 16,992 17,620 18,043 17,656 17,300 16,943
- Year-on-year broad money growth (percent): 5.5 2.3 2.3 4.8 4.4 5.3 4.9 5.6 5.6 5.6 5.6
- Year-on-year private sector credit growth (percent): 8.0 1.7 1.7 4.1 3.4 6.0 4.8 6.0 6.5 6.5 6.5

- Central Bank of Jordan: Net foreign assets (JD millions): 11,433 12,152 12,152 12,754 12,851 13,423 13,362 14,028 14,999 15,517 15,794
  - Foreign assets: 13,663 14,288 14,288 14,738 14,837 15,089 15,030 15,742 16,734 17,067 17,164
  - Foreign liabilities: 2,230 2,136 2,136 1,984 1,985 1,667 1,668 1,715 1,735 1,551 1,370
- Jordanian dinar reserve money (JD millions): 9,152 8,860 8,860 10,169 10,139 10,612 10,548 11,073 11,686 12,334 13,017
  - Commercial bank reserves (JD millions): 2,474 2,419 2,419 3,519 3,507 3,715 3,689 3,941 4,270 4,622 4,998
- Memorandum: Gross international reserves (USD millions): 18,190 19,081 19,081 19,716 19,855 20,211 20,128 21,132 22,531 23,001 23,138
  - Gross usable international reserves (USD millions): 16,432 17,319 17,319 17,965 18,104 18,460 18,577 19,381 20,979 21,700 22,437

### Financial soundness indicators (selected, 2015–2024 H1)
- Nonperforming Loans/Total Loans (percent): 4.3 4.2 4.9 5.0 5.5 5.0 4.5 5.1 5.1 5.6 (2024 H1)
- Coverage Ratio (percent): 77.9 75.4 79.3 69.3 69.5 71.5 79.9 81.5 75.6 73.1
- NPLs net of provisions/Equity (percent): 3.6 4.1 4.2 6.3 6.4 4.2 3.8 5.4 5.4 6.7
- Capital Adequacy Ratio (percent): 18.5 17.8 16.9 18.3 18.3 18.0 17.3 17.9 17.9 17.6
- Return on equity (percent): 8.9 9.1 9.6 9.4 5.1 8.3 8.8 9.3 9.3 9.8
- Liquidity Ratio (percent): 137.8 130.1 131.9 133.8 136.5 141.5 138.0 142.5 142.5 138.8

*Source: Central Bank of Jordan.*

### IMF access, phasing under the 2024 Extended Fund Facility (EFF)
- EFF Board approval: January 10, 2024 — SDR 144.102 million (242.0 percent of quota)
- First Review: April 1, 2024 — SDR 97.784 million (428.5 percent of quota)
- Second Review: October 1, 2024 — SDR 97.784 million (428.5 percent of quota)
- Third Review: April 1, 2025 — SDR 97.784 million (428.5 percent of quota)
- Fourth Review: October 1, 2025 — SDR 97.784 million (428.5 percent of quota)
- Fifth Review: April 1, 2026 — SDR 97.784 million (428.5 percent of quota)
- Sixth Review: October 1, 2026 — SDR 97.784 million (428.5 percent of quota)
- Seventh Review: April 1, 2027 — SDR 97.784 million (428.5 percent of quota)
- Eight Review: October 1, 2027 — SDR 97.780 million (428.5 percent of quota)
- Total access under EFF (SDR million): 926.370 (270.0 percent of quota)
- Jordan's quota: SDR 343.1 million

*Source: IMF staff estimates.*

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

### Annex I.  Implementation of the Main 2022 Article IV Recommendations

### Annex I.  Implementation of the Main 2022 Article IV Recommendations

### Fiscal Policy
- Broadening the tax base and enhanced tax compliance:
  - Introduced place of taxation rules.
  - Rationalized new GST exemptions via the new investment law.
  - Reduced smuggling following customs reform.
  - Adopted AI-based auditing on all submitted tax returns to strengthen ISTD’s audit function.
  - Launched an e-invoicing system to reinforce monitoring of economic transactions and contain under-invoicing.
  - Brought ASEZA within the national tax and customs systems, closing related tax loopholes.
  - Fully implemented the track-and-trace system for alcohol; improved efforts to tackle cigarette smuggling through stronger inter-agency border control and better compliance enforcement.
- Containing expenditure and enhancing spending efficiency:
  - Rolled out the e-procurement system (JONEPS) to the Education and Health Ministries and to the broader public sector.
  - Continued to contain growth of the civil service wage bill to below nominal GDP growth.
  - Implementing the Public Sector Modernization Roadmap to improve public administration efficiency.
  - Took steps to ensure health exemptions are targeted and do not exceed budget allocations.
- Strengthening fiscal risks monitoring:
  - The Ministry of Finance’s Macro-Fiscal Unit published a 2023 Fiscal Risk Statement and will continue to deepen analysis in subsequent risk statements.

### Electricity and Water Sectors
- Strengthening NEPCO’s financial sustainability:
  - The Cabinet adopted an implementation roadmap for electricity sector cost reduction and efficiency improvement to ensure NEPCO’s long-term financial viability.
  - Revenue-enhancing and cost-reducing measures progressing: introducing Time of Use tariffs, installing smart meters, increasing electricity exports to neighboring countries, reducing costs of LNG storage and regasification, improving electricity storage, and optimizing costs related to PPA commitments.
- Addressing water scarcity and improving financial sustainability of the water sector:
  - The Aqaba-Amman Conveyance project is progressing to desalinize and transport water from the port of Aqaba to Amman’s main metropolitan area.
  - Solid progress under the National Water Strategy consistent with the Cabinet-approved Financial Sustainability Roadmap to reduce non-revenue water and optimize operating and maintenance costs of the water sector.

### Monetary and Financial Sector Policies
- Preserving monetary and financial stability:
  - The CBJ has been firmly committed to the exchange rate peg to the U.S. dollar and adjusted policy rates in line with the U.S. Federal Reserve.
  - Strengthening financial sector resilience in line with the recommendations of the FSSA, including establishing a multi-agency crisis management committee and issuing regulations on prudential requirements on asset classification with Basel Core Principles and guidance.
- Enhancing the AML/CFT regime:
  - Significant progress resulting in the removal of Jordan from the FATF gray list in October 2023; all action items in Jordan’s FATF action plan have been implemented.
- Unwinding CBJ subsidized lending schemes:
  - Two lending schemes expired in 2023; the CBJ will gradually reduce the concessionality of its remaining scheme once the conflict subsides.

### Structural Reforms
- Labor market, female participation, and youth employment:
  - Amended the Labor Law and Social Security Law to enhance protections for women from harassment and violence and remove restrictions on female employment in certain professions and industries.
  - Expanded protections for pregnant women and persons with disabilities.
  - Repealed all Defense Orders introduced at the start of the pandemic, including those prohibiting employers from terminating worker contracts.
- Enabling private sector contribution:
  - Reduced and streamlined licensing requirements.
  - Submitted legislation to parliament to abolish licenses in the tourism sector.
  - Amended the Competition Law to curb prevalence of dominant firms and increase penalties for violations.
- Governance and transparency:
  - Implemented amendments to the Illicit Gains Law (passed August 2021) and the IACC law enacted in 2022.
  - Amended the Companies Law in 2022 to require submission of beneficial owners and establish the Beneficial Owner Registry system.
  - Continued efforts to ensure the Integrity and Anti-Corruption Commission (IACC) is adequately resourced.

### Risk Assessment Matrix (selected global and domestic risks, likelihood, impact, and policy responses)
- High likelihood / High impact — Intensification of regional conflicts:
  - Economic impacts: disruptions to energy, food, tourism, remittances, FDI and financial flows, payment systems, and increased refugee flows; worsened fiscal and current account balances; higher inflation via import prices.
  - Policy responses: provide targeted fiscal measures for essential services and vulnerable households (including refugees); strengthen social safety nets.
- High likelihood / High impact — Commodity price volatility:
  - Economic impacts: increased fuel and/or wheat import bill; larger current account deficit and external financing needs.
  - Policy responses: provide targeted fiscal measures to support vulnerable households; strengthen social safety nets.
- Medium likelihood / High impact — Global growth slowdown:
  - Economic impacts: reduced remittances and tourism inflows; weaker domestic growth; worsening fiscal and current account balances; higher funding costs and asset-quality deterioration for banks.
  - Policy responses: targeted support to vulnerable groups; monitor banks’ buffers and introduce FSSA-recommended measures; accelerate structural reforms to foster private investment and job-creating private sector development.
- Medium likelihood / Medium impact — Global growth acceleration:
  - Economic impacts: improved remittances and tourism inflows; stronger fiscal and current account positions.
  - Policy responses: continue fiscal and structural reforms to entrench gains from global growth acceleration.
- Medium likelihood / Medium impact — Monetary policy calibration risks:
  - Economic impacts: tighter global financial conditions could increase vulnerabilities of sovereign, banks, and households.
  - Policy responses: CBJ to follow the U.S. Fed on policy rates conditional on domestic conditions; provide targeted support to vulnerable groups; monitor banks’ buffers.
- Medium likelihood / High impact — Systemic financial instability:
  - Economic impacts: negative feedback between sovereign and banks; higher funding costs; asset-quality deterioration.
  - Policy responses: CBJ to follow the U.S. Fed and raise policy rates conditional on domestic conditions; monitor banks’ buffers and apply FSSA recommendations.
- Medium likelihood / High impact — Sovereign debt distress:
  - Economic impacts: capital outflows, rising risk premia, loss of market access, contraction of growth and social spending.
  - Policy responses: consider capital flow measures in line with the IMF Institutional View if market conditions become disorderly; maintain prudent macroeconomic policies; continue fiscal consolidation to ensure debt sustainability.
- High likelihood / Medium impact — Deepening geoeconomic fragmentation:
  - Economic impacts: slower FDI, higher import costs, worse fiscal and current account balances, potential lower potential growth.
  - Policy responses: accelerate structural reforms for diversification and private-sector development; monitor banks’ buffers and apply FSAP recommendations.
- Domestic risks highlighted as Medium likelihood / High impact:
  - Increase in water scarcity due to climate change: prioritize securing sustainable water supplies; targeted fiscal measures for vulnerable households; adopt measures to improve efficiency and financial sustainability of the water sector.
  - Persistently high unemployment: accelerate structural reforms to create jobs; strengthen social safety nets.

### Sovereign Risk and Debt Sustainability Assessment (summary findings and key statistics)
- Final DSA assessment: Sustainable.
- Debt/GDP dynamics and projections:
  - Public debt peaked at 89.2 percent of GDP in 2023.
  - Debt is expected to increase further in 2024 before starting to decline in 2025 to reach just below 80 percent by 2028.
  - The debt/GDP ratio is projected to decline to just below 80 percent by 2028.
- Financing and buffers:
  - Financing risks remain manageable in line with a relatively long effective debt maturity of 6 years and robust development partner support.
  - Large share of concessional debt provides an important cushion.
  - FX reserves at 7 months of imports.
  - Assets of the Social Security Investment Fund reached 40 percent of GDP.
- Risks and required policy actions:
  - Downside risks: further tightening of global financial conditions; persistence of regional conflicts; commodity price shocks; failure to reverse water and electricity sector deficits; weaker global growth; higher EM risk premia.
  - Policy recommendations: continued fiscal consolidation and accelerated structural reforms; decisive actions to address NEPCO's deficits; address water scarcity in a fiscally prudent manner; reforms to improve long-term pension sustainability and address climate change.
- Coverage and disclosures:
  - DSA coverage approximates general government and includes the central government, the Social Security Fund, NEPCO, WAJ, and water distribution companies; does not include local governments or the deposit insurance fund.
  - GCC deposits at the CBJ, amounting to US$833 million, are not included in public debt because the CBJ is assessed to have adequate capacity to repay.

*Source: IMF staff (content provided in the supplied annexes).*

### Annex III. Figure 1. Jordan: Public Debt Structure Indicators

### Annex III. Figure 1. Jordan: Public Debt Structure Indicators

### Public debt composition and holders
- Debt by currency: public debt is about evenly split between foreign and local currency-denominated instruments.
- Debt by holder (percent of GDP): mainly held by domestic commercial banks and external official creditors.
- Debt by governing law (2023, percent): split across Domestic law, Foreign law ex. multilateral, and Multilateral (labels shown in source).
- Debt by instruments: split between Marketable debt and Nonmarketable debt.
- Residual maturity: 6 years.
- Projection note: In the long term, the share of domestic financing is expected to increase as repayment of official external debt accelerates.
- Medium-term maturity expectation: debt is expected to be mainly in the range 1-5 years.

### Key statistics from Annex III. Table 3 (Baseline Scenario; percent of GDP unless indicated)
- Public debt levels (Actual/Projections):
  - 2023: 89.2
  - 2024: 90.5
  - 2025: 89.9
  - 2026: 88.1
  - 2027: 84.2
  - 2028: 79.6
  - 2029: 75.1
  - 2030: 70.9
  - 2031: 67.4
  - 2032: 63.5
  - 2033: 63.2
- Change in public debt:
  - 2023: 0.4
  - 2024: 1.3
  - 2025: -0.6
  - 2026: -1.8
  - 2027: -3.9
  - 2028: -4.6
  - 2029: -4.5
  - 2030: -4.2
  - 2031: -3.5
  - 2032: -3.9
  - 2033: -0.3
- Contribution of identified flows:
  - 2023: 1.0
  - 2024: 5.5
  - 2025: -0.5
  - 2026: -1.6
  - 2027: -3.7
  - 2028: -4.4
  - 2029: -4.3
  - 2030: -4.0
  - 2031: -3.4
  - 2032: -3.8
  - 2033: -0.5
- Primary deficit:
  - 2023: -0.7
  - 2024: -0.4
  - 2025: -1.6
  - 2026: -2.7
  - 2027: -4.2
  - 2028: -5.3
  - 2029: -5.8
  - 2030: -5.2
  - 2031: -4.5
  - 2032: -4.7
  - 2033: -4.7
- Noninterest revenues:
  - 2023: 37.5
  - 2024: 37.3
  - 2025: 38.8
  - 2026: 39.0
  - 2027: 40.0
  - 2028: 40.5
  - 2029: 39.8
  - 2030: 39.9
  - 2031: 40.1
  - 2032: 40.2
  - 2033: 40.4
- Noninterest expenditures:
  - 2023: 36.8
  - 2024: 37.0
  - 2025: 37.1
  - 2026: 36.3
  - 2027: 35.8
  - 2028: 35.2
  - 2029: 34.0
  - 2030: 34.7
  - 2031: 35.6
  - 2032: 35.5
  - 2033: 35.6
- Automatic debt dynamics:
  - 2023: 0.8
  - 2024: 0.9
  - 2025: 1.5
  - 2026: 1.8
  - 2027: 2.1
  - 2028: 2.0
  - 2029: 2.0
  - 2030: 1.8
  - 2031: 1.7
  - 2032: 1.5
  - 2033: 4.8
- Real interest rate and relative inflation:
  - 2023: 2.4
  - 2024: 2.9
  - 2025: 3.8
  - 2026: 4.4
  - 2027: 4.7
  - 2028: 4.5
  - 2029: 4.3
  - 2030: 4.0
  - 2031: 3.8
  - 2032: 3.5
  - 2033: 4.1
- Real interest rate:
  - 2023: 2.7
  - 2024: 3.0
  - 2025: 3.7
  - 2026: 4.2
  - 2027: 4.5
  - 2028: 4.3
  - 2029: 4.2
  - 2030: 3.9
  - 2031: 3.7
  - 2032: 3.4
  - 2033: 4.4
- Relative inflation:
  - 2023: -0.3
  - 2024: -0.1
  - 2025: 0.1
  - 2026: 0.2
  - 2027: 0.2
  - 2028: 0.2
  - 2029: 0.2
  - 2030: 0.1
  - 2031: 0.1
  - 2032: 0.1
  - 2033: -0.2
- Real growth rate (series appears truncated in source; numbers shown):
  - 2023: -2.5
  - 2024: -2.0
  - 2025: -2.2
  - 2026: -2.6
  - 2027: -2.6
  - 2028: -2.5
  - 2029: -2.3
  - 2030: (source shows truncated values) .-2.2 -2.1 -2.00.6
- Other identified flows:
  - 2023: 1.0
  - 2024: 4.9
  - 2025: -0.5
  - 2026: -0.7
  - 2027: -1.6
  - 2028: -1.1
  - 2029: -0.6
  - 2030: -0.6
  - 2031: -0.6
  - 2032: -0.6
  - 2033: -0.6
- Contribution of residual:
  - 2023: -0.6
  - 2024: -4.2
  - 2025: -0.1
  - 2026: -0.2
  - 2027: -0.2
  - 2028: -0.2
  - 2029: -0.2
  - 2030: -0.1
  - 2031: -0.1
  - 2032: -0.1
  - 2033: 0.2
- Gross financing needs:
  - 2023: 21.8
  - 2024: 17.9
  - 2025: 17.2
  - 2026: 20.4
  - 2027: 17.1
  - 2028: 15.0
  - 2029: 16.5
  - 2030: 15.5
  - 2031: 18.4
  - 2032: 16.7
  - 2033: 17.7
- Of which: debt service:
  - 2023: 22.6
  - 2024: 18.3
  - 2025: 18.8
  - 2026: 23.2
  - 2027: 21.3
  - 2028: 20.3
  - 2029: 22.3
  - 2030: 20.7
  - 2031: 22.9
  - 2032: 21.4
  - 2033: 22.4
- Debt service by currency:
  - Local currency (debt service):
    - 2023: 13.9
    - 2024: 12.8
    - 2025: 12.3
    - 2026: 16.1
    - 2027: 13.7
    - 2028: 13.9
    - 2029: 15.4
    - 2030: 14.7
    - 2031: 18.2
    - 2032: 18.2
    - 2033: 18.6
  - Foreign currency (debt service):
    - 2023: 8.6
    - 2024: 5.5
    - 2025: 6.5
    - 2026: 7.1
    - 2027: 7.7
    - 2028: 6.4
    - 2029: 6.9
    - 2030: 6.0
    - 2031: 4.8
    - 2032: 3.1
    - 2033: 3.9

- Memo items:
  - Real GDP growth (percent):
    - 2023: 2.9
    - 2024: 2.3
    - 2025: 2.5
    - 2026: 3.0
    - 2027: 3.0
    - 2028: 3.0
    - 2029: 3.0
    - 2030: 3.0
    - 2031: 3.0
    - 2032: -1.0 (source shows sequence ending in -1. 0)
  - Inflation (GDP deflator; percent):
    - 2023: 1.8
    - 2024: 2.1
    - 2025: 2.3
    - 2026: 2.5
    - 2027: 2.5
    - 2028: 2.5
    - 2029: 2.5
    - 2030: 2.5
    - 2031: 2.5
    - 2032: 0.6
  - Nominal GDP growth (percent):
    - 2023: 4.8
    - 2024: 4.4
    - 2025: 4.9
    - 2026: 5.6
    - 2027: 5.6
    - 2028: 5.6
    - 2029: 5.6
    - 2030: 5.6
    - 2031: 5.6
    - 2032: -0.3
  - Effective interest rate (percent):
    - 2023: 5.0
    - 2024: 5.6
    - 2025: 6.6
    - 2026: 7.4
    - 2027: 7.9
    - 2028: 7.9
    - 2029: 8.0
    - 2030: 7.9
    - 2031: 8.0
    - 2032: 7.8
    - 2033: 7.5

### Interpretation and main drivers (from text accompanying Table 3)
- Debt/GDP is expected to decline in the medium term, driven mainly by fiscal adjustment and real growth.
- The real effective interest rate exerts significant upward pressure on debt/GDP.
- Offsetting factors include interest revenue, some use of deposits, and reduction of stock of guarantees (e.g., comfort letters).
- The table and charts are based on general government debt and balances (the latter include Social Security surpluses).

### Realism of baseline assumptions (Annex III. Figure 2)
- The realism tools do not raise any significant red flags overall.
- Forecast errors for the primary deficit projection flag red, reflecting repeated revisions to the fiscal path amid repeated shocks.
- On debt-creating flows:
  - Growth was held back during the past 5 years by shocks including the ISIS shock, COVID, and regional tensions.
  - The 2024-29 period is expected to feature post-conflict recovery, positive output gaps, and gains from structural reforms under the new EFF, including new labor and competition legislation.
  - Large fiscal deficits and SFAs from issuance of “comfort letters” during 2019-23 (including COVID years) are programmed to tighten.
- On the interest bill/GDP ratio: marginal interest rates have been raised significantly due to monetary policy normalization, partially offset by fiscal drag from higher inflation and a relatively long debt maturity.

### Medium-term risk analysis (Annex III. Table 4 and text)
- Debt fanchart and GFN financeability indexes (selected indicators):
  - Fanchart width: 63.3 0.9
  - Probability of debt not stabilizing (pct): 6.4 0.1
  - Terminal debt level x institutions index: 40.9 0.9
  - Debt fanchart index: 1.9
  - Average GFN in baseline: 17.4 5.9
  - Bank claims on government (pct bank assets): 22.8 7.4
  - Chg. in claims on govt. in stress (pct bank asset): 3.0 1.0
  - GFN financeability index: 14.3
- Probabilities:
  - Prob. of missed crisis, 2024-2029 (if stress not predicted): 18.2 pct.
  - Prob. of false alarm, 2024-2029 (if stress predicted): 21.6 pct.
- Assessment summary:
  - While the debt-to-GDP ratio is high, the risk of non-stabilization is in line with the median, given the fiscal adjustment under the program.
  - Even under stress, financing risks are considered manageable.
  - The SSC holds assets outside general government worth about 19% of GDP, with 70% being liquid (deposits or stocks); these generate reasonable interest income, reducing GFNs.
  - GFNs are sensitive to changes in bank claims on the government, but the strong banking sector position makes a severe scenario unlikely.
  - Overall medium-term risk is assessed as moderate.

### External Sector DSA and External Debt Sustainability (Annex III. Figure 3, 4; Table 5; text)
- Coverage: external debt DSA covers (i) public and publicly guaranteed external debt, and (ii) external liabilities of the banking sector and private corporations. Private sector external debt estimates may be incomplete due to data limitations.
- Public external debt projections:
  - 2023: 42.2 percent of GDP
  - 2024: 44.9 percent of GDP
  - Around 39.5 percent of GDP in 2029 (gradual decline thereafter)
- Drivers: increase in 2024 driven by elevated external financing needs from food and energy shocks and prolonged regional conflict; profile remains favorable due to high proportion of concessional borrowing (commitments under the Jordan Compact, the 2019 Initiative, and the recently approved program).
- Private external debt:
  - Expected to remain moderate within the range of 34 to 41 percent of GDP.
  - As of end-2023, banks accounted for 78 percent of total external debt (primarily non-resident deposits); remainder held by non-financial corporations.
  - Projections assume banks maintain exposure to non-residents; non-bank corporate external debt share expected to increase from roughly a quarter to two-fifth of private external debt.
  - Given moderate private external debt size and strong local banks’ balance sheets, contingent liability risks to the public sector are expected to remain contained.
- External financing requirements:
  - Expected to remain sizable during the program period but to gradually decline thereafter, reflecting post-COVID current account adjustment, high food and energy import needs, and increased amortization (including Eurobonds due in 2025–29).
- Stress-test findings:
  - External debt trajectory appears resilient to standardized current account and combined shocks; interest rate and real growth shocks have marginal impact.
  - A substantial and permanent real depreciation shock would significantly elevate external debt-to-GDP beyond baseline projections, underscoring the importance of safeguarding the peg through prudent policies.
- External Debt Sustainability Framework (selected figures from Annex III. Table 5):
  - Baseline: External debt (percent of GDP):
    - 2019: 68.0
    - 2020: 79.3
    - 2021: 80.5
    - 2022: 83.3
    - 2023: 84.2
    - 2024: 85.8
    - 2025: 85.8
    - 2026: 85.8
    - 2027: 83.8
    - 2028: 82.1
    - 2029: 78.4
  - Of which: Public and Publicly Guaranteed External Debt:
    - 2019: 35.0
    - 2020: 40.9
    - 2021: 40.7
    - 2022: 39.9
    - 2023: 42.2
    - 2024: 44.9
    - 2025: 44.9
    - 2026: 46.1
    - 2027: 45.7
    - 2028: 45.3
    - 2029: 42.9
  - Change in external debt:
    - 2019: 0.8
    - 2020: 11.3
    - 2021: 1.2
    - 2022: 2.8
    - 2023: 0.9
    - 2024: 1.6
    - 2025: 1.6
    - 2026: 0.0
    - 2027: -2.0
    - 2028: -1.7
    - 2029: -3.6
  - Identified external debt-creating flows (percent of GDP):
    - Series in table (rows 3–13) show contributions from current account deficit excluding interest, net non-debt creating capital inflows, automatic debt dynamics, nominal interest rate contribution, contribution from real GDP growth, price and exchange rate changes, and residual (incl. change in gross foreign assets).
  - External debt-to-exports ratio (percent):
    - 2019: 187.2
    - 2020: 331.7
    - 2021: 268.8
    - 2022: 195.3
    - 2023: 193.4
    - 2024: 193.4
    - 2025: 201.8
    - 2026: 206.7
    - 2027: 196.3
    - 2028: 192.9
    - 2029: 184.6
  - Gross external financing need (in billions of U.S. dollars):
    - 2019: 4.1
    - 2020: 5.9
    - 2021: 5.7
    - 2022: 7.6
    - 2023: 5.0
    - 2024: 5.1
    - 2025: 5.1
    - 2026: 6.5
    - 2027: 7.2
    - 2028: 7.2
    - 2029: 7.0
  - Gross external financing need (percent of GDP) (selected values in table):
    - 2019: 9.2
    - 2020: 13.5
    - 2021: 12.4
    - 2022: 15.7
    - 2023: 9.8
    - 2024: 9.6
    - 2025: 4 4 49.6 44 (table formatting in source shows concatenated figures)
- External sector assessment (Annex IV highlights):
  - Overall assessment: external position of Jordan in 2023 is assessed to be broadly consistent with fundamentals and desirable policies.
  - Current account deficit expected to widen from 3.7 percent of GDP in 2023 to about 4.3 percent of GDP in 2024.
  - Reserve levels remain adequate; maintaining reserves above 100 percent of the IMF ARA metric is emphasized.
  - NIIP and asset/liability position (2024H1 and end-2023 references):
    - NIIP: -104 percent of GDP in 2024H1 (similar to end-2023 level of -103.7 percent of GDP).
    - Gross assets: 60 percent of GDP.
    - Gross liabilities: 166 percent of GDP.
    - Reserves: over 62 percent of total gross assets and 37 percent of GDP.
    - Commercial banks’ foreign deposits and loans: 14 percent of GDP (as part of gross assets).
    - FDI: about 78 percent of GDP (about half of gross liabilities).
    - Loans and deposits of commercial bank: 30 percent of GDP.
    - Government liabilities: 20.8 percent of GDP.
  - Assessment: large share of FDI mitigates risks from gross external liabilities; banking sector liabilities partly offset by banks’ external assets; NIIP projected to improve over medium term with narrowing current account deficits given sound policies and reform progress.

*Source: IMF Staff.*

### 7.8 percent of GDP in 2022 to 3.7 percent of GDP

### 1jorea2024003-print-pdf - 7.8 percent of GDP in 2022 to 3.7 percent of GDP

### Current Account and Trade Balance
- Current account deficit fell from 7.8 percent of GDP in 2022 to 3.7 percent of GDP in 2023, driven by recovery in exports and tourism, along with a decline in food and fuel prices.
- Ongoing regional conflict is likely to slow tourism receipts momentum and put additional pressure on the current account deficit.
- Q1 2024: a 7.4 percent year-on-year increase in the trade deficit, resulting in a current account deficit of 8.8 percent of GDP for the quarter.
- By end-2024, the current account deficit is expected to be 4.3 percent of GDP reflecting resilience in exports despite the escalating regional conflict.
- Energy imports projected to decrease slightly from 7.5 percent of GDP in 2023 to 6.5 percent in 2024.
- Medium-term projection: current account deficit expected to gradually narrow to around 3 ½–4 percent of GDP.
- EBA CA model estimates:
  - 2023 current account norm of -4.5 percent of GDP.
  - After adjustments, CA balance adjusted to -4.5 percent of GDP.
  - Current account gap of -0.3 percent of GDP, including a policy gap of 2.2 percent of GDP (reflecting a tighter fiscal position than in equilibrium to bring down debt to sustainable levels).
- Policy note: Policy adjustments alone are unlikely to eliminate the CA gap and need to be complemented by structural reforms to enhance competitiveness.

### Real Exchange Rate (REER) and NEER
- Background movements:
  - 7.4 percent appreciation in 2023 (prior to 2024 movements).
  - REER depreciated in 2024H1, with a depreciation of 2.9 percent by end-June compared to the same time in 2023.
  - NEER continued to appreciate by 18 percent for the first 10 months in 2023 compared to the same period in 2022.
  - NEER appreciation continues in 2024 by 3.4 percent on average for the first half of the year.
- Assessment:
  - EBA-lite CA model implies a REER overvaluation of 1.0 percent in 2023, based on a CA gap of 1.2 and a REER elasticity of -0.3.
  - Since the Jordan dinar is pegged to the U.S. dollar, results may also reflect external economic conditions; CA model results considered more reliable.
  - Overall staff assessment: 2023 REER gap was in the range of 1.0 to -15 percent.

### Capital and Financial Accounts; FDI and Donor Support
- Net FDI more than doubled in 2022, then decreased by 38.5 percent in 2023.
- Net FDI projected to continue to decrease in 2024 due to the prolonged regional conflict.
- Official budget support from official donors is expected to exceed that of 2023.
- Errors and omissions remained large in 2023.
- Medium-term outlook:
  - Current account deficit projected to further narrow and FDI is expected to pick up.
  - Structural impediments to attract FDI and a potential decline of official donor support could pressure financing of the current account deficit and maintaining an adequate reserve buffer.
- Policy recommendation: Continued structural reforms to improve competitiveness and the business environment are important to boost investor confidence and sustain donor support.

### FX Intervention and Reserves
- Policy framework:
  - Jordanian dinar pegged to U.S. dollar; FX intervention implemented as a supplementary policy to maintain the peg.
  - Main policy instrument is the policy rate, which is adjusted 1-  to -1 with changes in the U.S. Federal Reserve policy rate.
- Reserves and adequacy:
  - Gross usable reserves were 33 percent of GDP at end-2023, projected to remain broadly stable in the coming years.
  - Reserve coverage as measured by the IMF ARA metric stayed at 104 percent, or 7.4 months of imports in 2023, and is expected to stay at a similar level in 2024.
- Assessment and guidance:
  - Reserves have stayed above program targets and provided important support for the peg.
  - Gross usable reserves at or above the 100 percent of the IMF reserve adequacy metric should be maintained.
  - Continued fiscal consolidation and implementation of structural reforms will strengthen the external sector and contribute to further reserve accumulation.

### Annex V — Implementation of 2023 FSAP Recommendations (Selected)
- Systemic Risk Analysis and Macroprudential Policy Framework:
  - Data gaps to incorporate cross-border dimensions, enable top-down bank stress testing on a globally consolidated basis, model probabilities of default (PDs), expand nonfinancial corporate vulnerability analysis, and analyze household vulnerabilities at a more granular level — CBJ has collected additional data and requested IMF TA; top-down bank stress testing on a globally consolidated basis implemented.
  - Enhance readiness to implement borrower-based macroprudential tools — In progress.
  - Monitor sovereign-bank linkages and concentration risk on large nonfinancial corporate exposures — In progress; Banking Supervision Department monitors exposures per Instructions no (2/2019) dated 4/3/2019.
  - Monitor the LCR by significant currency and analyze FX liquidity separately — Implemented.
  - Strengthen and revamp the role of the Financial Stability Committee — Implemented.
- Financial Sector Oversight:
  - Update bank supervisory framework to be more risk-based and forward looking — In progress.
  - Develop Pillar 2 risk assessment methodologies — In progress.
  - Align prudential requirements on asset classification with Basel Core Principles — CBJ issued regulations in June 2024.
  - Align prudential requirements on concentration risk and related party exposures — Under process.
  - Implement enforceable regulations in key risk areas (market, operational, IRRBB, country and transfer risk) and strengthen supervision — In progress.
  - Ensure adequate banking supervision staff resources — Significant number of appointments made since end-October 2023 to strengthen staffing.
- AML/CFT and Beneficial Ownership:
  - Continue FATF action plan implementation — Implemented; all action items in Jordan’s FATF action plan have been implemented (met SB for October 2023).
  - Enhance identification and verification of Ultimate Beneficial Ownership — Implemented via guidance and bylaw with Companies Control Department and AML/CFT Unit.
  - Virtual assets risk assessment and framework — Implemented; assessment completed and published on Feb-2023.
- Financial Safety Net and Crisis Management:
  - Multi-agency crisis management committee (CBJ, Ministry of Finance, JODIC) — Implemented.
  - Resolution planning for D-SIBs, depositor compensation design and depositor payout borrowing/source arrangements — In progress.
- Financial Development:
  - Reassess subsidized funding schemes and phase-out/constrain concessionality — Assessment of Medium-Term Advances to Licensed Banks Program under progress; CBJ committed to gradually reduce concessionality as agreed with the IMF.
  - Late payments law for B2B and G2B transactions — In progress.

### Annex VI — Access to Finance for MSMEs
- Role of MSMEs:
  - Firms with more than 100 employees account for less than one percent of total firms and about 40 percent of total employees (2021 data, Department of Statistics of Jordan).
  - Service sector contributes almost 60 percent of GDP; presence of micro, small and medium enterprises (MSMEs) is substantial in this sector.
- Financial inclusion trends:
  - Account ownership rose from 25 percent in 2014 to 47.1 percent in 2021 (Global Findex).
  - 2019 Enterprise Survey: ~85 percent of MSMEs reported to have bank accounts, but only ~15 percent have received bank financing.
- Constraints to MSME financing:
  - Demand and supply challenges: high informality, low financial literacy, shortcomings in financial management and reporting, dominance of cash, lack of competition among banks and non-banks.
- Microfinance institutions (MFIs):
  - MFIs prohibited from taking deposits; they borrow from banks at relatively high cost, leading to expensive credit offers.
  - About 60 percent of existing MFIs focus operations on serving micro and small enterprises (CBJ data).
  - Policy consideration: grant access to wholesale facilities offering less expensive funding for MFIs; consider establishment of an arm’s-length wholesale fund for on-lending to MFIs based on sustainability, good governance, and no market distortion.
- Credit infrastructure:
  - Enhance credit bureau operations and credit scoring services for borrowers without formal credit history, including collecting and analyzing big data, to help banks and non-banks extend loans to small businesses.
- Existing programs:
  - CBJ and MOPIC launched a JD 21 million program to finance small companies and micro-projects through licensed microfinance companies; government to subsidize part of financing costs.
  - First JD 9 million allocated to four microfinance companies. Interest rates capped at 9 percent, with borrowers paying up to 5 percent.
  - Jordan Loan Guarantee Corporation will guarantee 85 percent of loans, limited to JD 25 thousand for companies and JD 5 thousand for professionals.

### Annex VII — Private Sector Competition and Business Environment
- Structural reform progress:
  - Under the Economic Modernization Vision, Jordan advanced amendments to the Competition Law in 2023 to refine market concentration criteria and increase penalties for anticompetitive behavior.
- Business environment strengths:
  - Jordan scores well on property rights, administration, governance, and intellectual property rights enforcement (based on 2019 data).
  - All registered companies must maintain accurate accounting records and present annual audited financial statements; public companies adhere to IFRS.
  - Jordan has ratified UN Convention against Corruption and implemented anti-corruption measures; governance indicators generally robust and Jordan outperforms regional average.
- Start-up environment:
  - 2019 Business Environment Survey: Jordan outperforms MENA average on indicators including growth of innovative companies.
  - 2023 Government AI Readiness Index: Jordan excels in foundational IT and internet infrastructure and government support for investment in emerging technologies.
  - Startup Blink ranking as of 2024: Jordan ranked 5th in the Middle East and 68th globally (statement retained as presented).
- New business density:
  - New business density ratio (newly registered firms per 1,000 working-age people) underperforms most regional peers and has experienced a slight downward trend in recent years.

*Source: 1jorea2024003-print-pdf - 7.8 percent of GDP in 2022 to 3.7 percent of GDP*

### 3. Given the broadly conducive business environment, firms’ financial performance overall

### 3. Given the broadly conducive business environment, firms’ financial performance overall could be better.

### Firms’ recent performance and capacity utilization
- Total Factor Productivity (TFP) has been weak over the past 15 years but has begun to improve in recent years, driven by the progress of reforms implemented by the authorities.
- Firms have been experiencing declines in sales and productivity in recent years, and they are also showing signs of under-utilization of their production capacities.
- While large firms in Jordan show relatively better performance in capacity utilization, high-frequency data from listed firms reveals a troubling picture of their overall financial health.
- Since 2010, ROA in Jordan has stayed relatively flat, around 2 percent, substantially lower than the MENA region averages of 4 percent.
- ROE has come down from higher levels in the period 2007–12, to around 2.5 percent the period 2012–23, well-below the peers in the region.
- Despite the low performance, debt levels (in comparison to equity) are generally high in Jordan, in comparison with other EMs.
- The analysis of listed firms used Capital IQ data, provided by S&P Global, and included 138 listed companies from Jordan.

### Entrepreneurship, startups, and SME financing
- The Innovative Startups and SMEs Fund (ISSF) has leveraged $98 million to support entrepreneurial activities.
- New Business Density Ratio series are presented (2006–2020) across United Arab Emirates, Egypt, Arab Rep., Jordan, Morocco, Tunisia, and MENA region (Excl. Jordan) (figures shown in source).

### Innovation capabilities of private firms
- Measured by patent applications, R&D expenditures, and the quality of research institutions, Jordan firms’ innovation capabilities lag the MENA region and more broadly, global average.
- Firm survey data show notably lower percentages of process innovations and R&D spending in Jordanian firms compared to their counterparts in the MENA region and globally.
- These indexes are used as critical indicators for a firm’s future productivity; limited innovation capabilities could constrain economic growth and undermine reform efforts.
- The Jordanian government's Economic Modernization Vision aims to foster innovation and enhance competitiveness, which, if successful, could bolster productivity and drive sustainable growth.

### Competition environment and licensing
- Jordan has been making solid progress in enhancing market competition, but more needs to be done.
- Regional instability, high energy costs, and global trade fluctuations have strained private firms, but private firms' weak innovation and limited influx of new businesses point to the need for stronger competition pressures.
- Licensing reforms: notable progress in abolishing licensing requirements for libraries, cultural and sports activities, and streamlining processes for private schools, kindergartens, and the food sector.
- Government submitted legislation to parliament aimed at abolishing licenses in the tourism sector and is working to address remaining licensing requirements over the coming years, with goals to fully eliminate or significantly streamline processes and possibly extend duration of certain licenses beyond one year.
- Sectors like transport and energy remain encumbered by complex licensing regimes, impeding competition in those industries.
- Price regulation: Article 4(B) of the Jordanian Competition Law allows the Council of Ministers to temporarily control prices in response to exceptional situations, subject to review every six months.
- The government has set minimum prices in some sectors for many years, including cargo, oil derivatives and LPG, retail margins for gas stations, staple goods, and non-prescription medications. These minimum indicative prices can help prevent excessively low pricing but may also affect competition, coordination incentives, innovation, and consumer costs.

### Informality and competition
- Based on the World Bank Enterprise survey, nearly 100 percent of firms in Jordan were formally registered when they began operations, regardless of firm size (the source notes this can underestimate the true size of the informal sector).
- The survey shows that 80 percent of small and medium-sized firms report facing competition from informal firms, with a slightly lower percentage observed among larger firms.
- It is estimated that more than 55 percent of private sector Jordanian workers work in the informal sector (Winkler and others, 2019).
- Firms in Jordan do not overwhelmingly view informality as a major constraint, but bringing the informal economy into the formal sector could increase tax revenues and GDP and improve firms' access to financing and government support.

### Competition institutions and legal framework
- A new Competition Directorate was established under the Competition Law; the 2023 amendments strengthened its mandates (duties include promoting a culture of competition, implementing policies, investigating anti-competitive behavior, managing complaints, and handling requests related to economic concentration and exemptions).
- Jordan’s Competition Law: provisional law in 2002, made permanent in 2004; amended in 2011 (increased penalties, excessive pricing added as abuse) and 2023 (revised provisions related to unfair competition, curbing prevalence of dominant firms, sharpening definition for market concentration, increasing penalties).
- The law is undergoing further revisions to enhance the independence of the Competition Directorate in line with international best practice.
- Regional comparison: some MENA countries (Saudi Arabia, Morocco, Tunisia) have established independent competition authorities with varying degrees of autonomy and enforcement powers.
- 2019 data suggest limited institutional independence for Jordan’s competition directorate; the agency might not have complete autonomy and could be subject to external influences.
- The role of courts in changing the scope of antitrust statutes in Jordan is limited; reliance on private litigation for enforcement is significant, which may leave smaller cases overlooked.

### Empirical model results on institutions and competition
- A fixed effects regression was estimated for a panel dataset with 128 countries for the years 2000 until 2020 to examine the importance of independent institutions on competitiveness.
- In the fixed effect regression model, judicial independence and impartial courts are used as proxies for institutional independence (due to lack of cross-country data on independence of competition directorates).
- The dependent variable is New Business Density Ratio, used as a proxy for competition.
- Main findings consistently show that both target variables (judicial independence and impartiality) are highly significant across all specifications, emphasizing the crucial role of institutional independence in fostering competition.
- The model controls for correlated factors (for example, regulatory quality or reduced corruption); the consistent significance of the target variables suggests judicial independence and impartiality are the primary mediating channel through which institutions influence competition.
- The analysis stems from joint work published in Chapter 2 of the Regional Economic Outlook of Middle East and Central Asia Department (IMF, October 2024).

### Key statistics and data notes (preserved from source)
- ISSF leveraged $98 million.
- ROA in Jordan: around 2 percent (since 2010).
- MENA region average ROA: 4 percent.
- ROE in Jordan: around 2.5 percent (period 2012–23).
- Analysis included 138 listed companies from Jordan (Capital IQ data, S&P Global).
- Nearly 100 percent of firms in Jordan were formally registered when they began operations (World Bank Enterprise survey).
- 80 percent of small and medium-sized firms report facing competition from informal firms.
- It is estimated that more than 55 percent of private sector Jordanian workers work in the informal sector.
- Fixed effects panel: 128 countries, years 2000 until 2020.

*Source: IMF staff compilation from "3. Given the broadly conducive business environment, firms’ financial performance overall could be better."*

### 13. A strong competition enforcement regime comprising independent institutions that

### 13. A strong competition enforcement regime comprising independent institutions that 

### Strengthening the competition directorate — recommendations
- Strengthen the independence of the competition directorate by:
  - (i) establishing a clear legal framework to ensure that the legal framework explicitly guarantees the independence of the competition authority from political and commercial influences; set up the authority as an autonomous entity with its own budget and governance structures; potentially establish the competition authority as a statutory body, distinct from any government ministry, with a clear mandate to enforce competition law impartially.
  - (ii) securing funding independent of the political cycle by allocating sufficient and stable funding directly from the national budget to ensure the authority can operate independently and effectively without external pressures.
  - (iii) making the appointment processes more transparent, including by implementing a transparent and merit-based process for appointing the leadership of the authority to avoid conflicts of interest and ensure the selection of highly qualified individuals.

### Enhancing enforcement capabilities — recommendations
- Enhance enforcement capabilities by:
  - (i) providing the competition authority with the adequate human, technical, and financial resources to conduct thorough investigations and enforce competition laws effectively.
  - (ii) investing in training and capacity building for the staff of the competition authority to keep them updated on best practices and emerging trends in competition law and economics.

---

### Technical note: Model and estimation — methodology
- Fixed Effects Regression
  - Equation form: 푦푦푖,푡 = 훼푖 + 훽훽푖,푡 + ε푖,푡
  - Where:
    - 푦푦푖,푡: Dependent variable; New business density (new registrations per 1,000 people ages 15-64).
    - 훼푖: Entity-specific intercept (fixed effect).
    - 훽훽푖,푡: Coefficients for the independent variables.
    - ε푖,푡: Error term.
- Time frame: analysis spans the years from 2000 to 2021.
- Estimation considerations:
  - Fixed effects (FE) estimation performed by time demeaning the data to remove components constant over time and across entities.
  - Traditional FE model assumes strict exogeneity; potential reverse causality (competitive business environment influencing judicial independence) considered.
  - A ML-SEM specification (cross-lagged panel model with FE) introduced by Allison (2017) was also applied; model outcomes were similar to the standard FE model, indicating no evidence of reverse causality.

### Data — target and control variables (as listed)
- Target variables
  - Judicial Independence (Rating): Measures the level of judicial independence. Source: Economic Freedom, Fraser Institute.
  - Impartial Courts (Rating): Measures the level of impartiality of courts. Source: Economic Freedom, Fraser Institute.
- Control variables
  - Unemployment Rate: Percentage of the labor force that is unemployed. Source: World Economic Outlook (IMF).
  - Real GDP per Capita: Adjusted GDP per capita in constant prices. Source: World Economic Outlook (IMF).
  - Gross Fixed Capital Formation: Investment in fixed assets, in national currency billions. Source: World Economic Outlook (IMF).
  - Economic Complexity Index: Reflects the diversity and complexity of a country's export structure. Source: The Observatory of Economic Complexity (OEC).
  - Informality Index: Measures the size of the informal economy. Source: ILO (International Labour Organization).
  - Dummy for MENA: Binary variable indicating if a country is in the MENA region. Source: World Economic Outlook (IMF).
  - Regulatory Quality: Estimates of the ability of the government to formulate and implement sound policies. Source: World Bank (Worldwide Governance Indicators).
  - Tariffs (Rating): Measures the level of tariffs imposed. Source: World Bank, World Trade Organization (WTO).
  - Fixed Broadband Subscription: Number of fixed broadband subscriptions per 100 people. Source: World Bank and International Telecommunication Union (ITU).

---

### Findings and results (summary of presented material)
- FE estimation and robustness check via ML-SEM produced similar outcomes, with no evidence of reverse causality between competitive business environment and judicial independence.
- Tables referenced: Table 1. Jordan: Fixed Effects Regressions I; Table 2. Jordan: Fixed Effects Regressions II.

---

### Annex VIII. Unlocking the Benefits of Trade and FDI in Jordan

### Key messages — role of trade and FDI
- Trade and FDI are identified as growth drivers under the government’s Economic Modernization Vision (EMV).
- To unlock benefits of trade and FDI, reforms are needed to:
  - Enable the private sector to meet trade conformity requirements.
  - Improve trade logistics.
  - Further reduce restrictions on FDI.
- Expected outcomes: promote integration into value chains and bolster competitiveness of Jordanian products.

### Introduction — strategic objectives
- Trade allows access to larger markets, boosts productivity, and enhances national income and economic growth.
- FDI can introduce new capital and technology, fostering innovation and infrastructure development.
- EMV priorities: strengthen export quality, attract significant investments, improve trade facilitation, and integrate into global value chains.

### Trade — challenges and opportunities (findings)
- Growth of international goods trade has slowed over past decades in the context of a challenging external environment; goods trade volume growth reduced post Global Financial Crisis (GFC).
- Growth of goods exports and imports volumes recovered substantially since the COVID-19 pandemic (2021–23).
- Deceleration factors: recurring regional tensions and conflicts, disruptions to shipping routes, and geoeconomic fragmentation (IMF April 2024).
- Share of high-tech exports is relatively low; Economic Complexity Index (ECI) has declined and needs to be turned upward to support stronger sustainable growth.
- Jordan’s participation in global value chains (GVC) is limited; participation as of 2022 remains largely unchanged relative to 2016.
- Conducive trade policies:
  - Trade agreements with the EU, GCC, and U.S. result in import tariffs on Jordanian goods that are zero or near zero.
  - Government’s decision of reducing and unifying customs tariffs in 2022 resulted in a further decrease in tariffs.
  - Jordan imposes relatively low non-tariff measures on goods from other countries, but Jordanian exporters face substantial non-tariff measures imposed by other countries.
- Trade environment and logistics:
  - Jordan’s trade environment, proxied by the International Logistics Performance index, performs better than other MENA countries (MENA list includes Algeria, Djibouti, Egypt, Iran, Iraq, Lebanon, Libya, Mauritania, Morocco, Somalia, Sudan, Syria, Tunisia, Yemen), with room for further enhancement.
  - Improving logistics performance can provide a substantial boost to trade.
- Price competitiveness:
  - Unit labor cost (ULC) based real exchange rate (RER-ULC) appreciated substantially in the past decade, indicating a decline in competitiveness owing to the divergence between wage and price inflation rates.
  - To promote international trade, bolstering price competitiveness requires lowering unit labor costs by increasing productivity and/or containing the growth of wages.

### Figures and indicators referenced
- Annual Growth in Goods Trade (Trade volume average growth, in percent): Pre-GFC (2000-2008); Post-GFC (2011-2019); Recent (2021-2023). Note: 2020 excluded.
- Annex VIII. Figure 1: High-Technology Exports (Percent of manufactured exports) and Economic Complexity Index (ECI) series for Jordan and comparators.
  - ECI values shown across years include: 0.48, 0.59, 0.67, 0.70, 0.73, 0.76; ECI noted as 0.70 and 0.68 in chart annotations; EM ECI Average and Jordan series plotted.
- Nontariff Measures: chart of nontariff measures (weighted average) comparing Jordan, MENA, Middle income countries, High Income Countries for 2011-2016 and 2017-2021.
- Logistics Performance (Annex VIII. Figure 2): International Logistics Performance Index components (Overall LPI, Customs, Infrastructure, International shipments, Logistics quality, Tracking and tracing, Timeliness) compared: Jordan, AEs, MENA excl. GCC, GCC.

### Trade policy environment — specific observations
- Trade agreements and tariff reforms have reduced tariffs for Jordanian exports to major partners.
- Other countries’ non-tariff measures create export obstacles; average number of non-tariff measures imposed by other countries on Jordan is about the same level as on the rest of the world (based on UNCTAD TRAINS data and IMF staff calculations).

### Manufacturing competitiveness
- Annex VIII. Figure 2 presents manufacturing sector competitiveness indicators using UNIDO data and other sources; trends and comparisons are displayed (details in figure).

### FDI — introduction to section C
- Section C begins an analysis of FDI characteristics and factors related to stronger inflows (text continues beyond the provided excerpt).

*Source: 1jorea2024003-print-pdf - 13. A strong competition enforcement regime comprising independent institutions that; Annex VIII. Unlocking the Benefits of Trade and FDI in Jordan (excerpts).*

### 10. FDI inflows in Jordan, increased significantly from 2003 to 2006, reaching roughly

### 10. FDI inflows in Jordan, increased significantly from 2003 to 2006, reaching roughly

### FDI trends in Jordan
- FDI rose from about 5 percent of GDP in 2003 to 23 percent of GDP in 2006, driven by:
  - the government privatization program,
  - the influx of real estate investment from Iraq after the war,
  - rising oil prices and excess savings in GCC countries.
- FDI declined after the onset of the global financial crisis (GFC) in 2008 and subsequent regional events:
  - FDI as a percent of GDP dropped from 12.4 in 2008 to 4.1 in 2015.
- Global headwinds further reduced FDI to an average of 1.5 percent of GDP for 2019-21.
- FDI bounced back slightly to 2.5 percent of GDP in 2022, reaching around $US1.3 billion.

### Regional comparison
- During 2003-10, FDI inflows to Jordan averaged at roughly 12 percent of GDP.
- Comparative averages for the same period:
  - Gulf Cooperation Council (GCC): 4 percent of GDP.
  - MENA (excluding GCC): 3 percent of GDP.
- In recent years, FDI inflows to Jordan have converged to approximately 2 percent of GDP, comparable with many regional peers.
- Across the MENA region, FDI has declined over the past two decades except for notable increases in the UAE following policy changes.

### UAE case (Annex VIII. Box 1) — illustrative regional policy reforms
- UAE FDI patterns:
  - Averaged around 9 percent of GDP for 2003–18.
  - Picked up to reach around 20 percent of GDP annually since 2019.
- Policy and institutional changes contributing to the increase:
  - 2018 revision of the FDI Law to open certain sectors and allow foreign investors to own 100 percent of their businesses through an approval process.
  - 2020 changes to the Commercial Companies Law removing a longstanding requirement for onshore companies to be 51 percent owned by UAE nationals.
  - 2021 new commercial companies' law codifying past changes.
  - Reforms to improve business setup and operation efficiency, introduction of long-term residency visas (Golden Visa), and revamped legal framework (intellectual property, commercial laws, dispute resolution).

### FDI composition and source countries in Jordan
- Sectoral composition per the 2019-20 Central Bank of Jordan FDI Survey:
  - Financial and insurance sector: 25.2 percent of total FDI value.
  - Manufacturing: 15.9 percent.
  - Mining and quarrying: 10.3 percent.
  - Construction activities: 9.7 percent.
- Largest source countries of inward FDI stock in 2020:
  - United Arab Emirates (UAE): 14 percent.
  - United Kingdom: 8.2 percent.
  - Kuwait: 7.2 percent.
  - Bahrain: 7 percent.
  - France: 6.2 percent.
- Combined, these countries represent more than 42 percent of total FDI stock in Jordan.

### FDI restrictions and reforms in Jordan
- Restrictions on FDI have declined over the years in sectors such as manufacturing, telecommunications, and financial services.
- New legal framework:
  - Investment Environment Law for 2022.
  - Investment Environment Regulation by-law No. 7 of 2023.
- Current ownership rules:
  - Almost all sectors allowed for full foreign ownership, except a few specific types of businesses that require cabinet approval to exceed the 49 percent ownership limit.

### Factors influencing FDI (literature and survey evidence)
- World Bank Global Investment Competitiveness survey 2019-20: top three factors influencing investment decisions are:
  - political stability,
  - macroeconomic stability,
  - a country’s legal and regulatory environment.
  - Nearly 9 in 10 businesses consider these factors to be “important” or “critically important.”
- Other determinants highlighted in literature include:
  - institutional quality (corruption, government transparency, predictability of laws and regulations, protection of property rights),
  - market size, infrastructure availability, trade openness,
  - availability of skills and talent via an educated workforce,
  - physical infrastructure and ability to export and trade,
  - increased uncertainty from trade disputes and tariffs.

### Empirical findings (panel analysis, 2001–2020)
- Data and method:
  - Fixed effects regressions on a panel dataset of emerging market economies (sample: Emerging Markets from 2001 to 2020, unbalanced panel dataset).
  - Dependent variable: FDI measured as a share of GDP.
  - Controls included GDP, debt levels, trade openness, NEER, REER, CPI inflation, WGI indices, Fraser Institute indicators, and a crisis dummy.
- Key statistically significant regression results (selected coefficients from final specifications; robust standard errors in parentheses; significance indicated):
  - Lagged GDP Growth (rate; WEO): 0.081* (0.045) in one specification.
  - Debt-to-GDP (%; WEO): -0.015** (0.006), with alternate specifications showing -0.020*** (0.006), -0.023*** (0.007), -0.021*** (0.007).
  - Trade Openness (WEO): 4.268** (1.988), with alternate specifications around 4.593* (2.413) to 4.674* (2.462).
  - NEER (index, IMF IFS data): -0.007* (0.004) in one specification.
  - REER (index, IMF IFS data): -0.021** (0.009) to -0.026** (0.010) in some specifications.
  - Inflation (rate, WEO): 0.081* (0.041) in one specification.
  - Government consumption (% of total consumption; Fraser): -0.164*** (0.039) to -0.176*** (0.045) across specifications.
  - Transfers and subsidies (% of GDP; Fraser): 0.112** (0.048) to 0.099* (0.053) across specifications.
- Model diagnostics and sample:
  - Observations: 748 in later specifications.
  - Number of countries: 40 in later specifications.
  - R-squared: between 0.141 and 0.154 across reported specifications.
- Interpretation:
  - Lower public debt and smaller government footprint (higher government consumption share associated with lower FDI) are associated with higher FDI inflows.
  - Lagged growth and trade openness contribute positively to FDI inflows.
  - Results should be interpreted with caution due to data limitations for MENA and potential omitted factors better addressed in a gravity model (geographical distance, common language, legal framework, geoeconomic fragmentation).

### Conclusion and policy recommendations
- Context:
  - Despite regional conflicts and trade-route disruptions, Jordan has sustained stability and investor confidence.
  - Recent trade route disruptions through Bab Al-Mandab impacted exports and imports; prompt government actions to develop alternative routes have mitigated impacts and trade volumes have started to recover.
  - Jordan has maintained prudent macroeconomic policies with low and stable inflation and contained sovereign spread volatility.
- Policy recommendations:
  - Near term:
    - Facilitate the private sector in meeting trade conformity assessment requirements.
    - Address infrastructure bottlenecks and improve logistics performance by streamlining regulatory procedures for export and import.
    - Develop other trade routes and facilitate regional linkages and connectivity to promote trade and integration into global value chains.
  - Medium term:
    - Continue reforms to improve institutional environment and governance to attract FDI.
    - Accelerate reforms that enhance institutional quality, transparency, stability, and predictability in policymaking.
  - Overall strategy:
    - Promote trade reforms that support economic diversification.
    - Leverage Jordan’s well-educated labor force to produce higher quality of existing products before diversifying into new areas.
    - Pursue GVC integration while lifting productivity via structural reforms to produce high quality tradable goods at relatively low cost, important under a pegged exchange rate regime.
    - Integrate these reforms into a broader structural reform agenda to lift productivity and secure stronger and more sustainable growth.

*Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1jorea2024003-print-pdf.pdf*

### Annex IX . Data Issues

### Annex IX . Data Issues

### Data adequacy assessment and key data issues
- Jordan subscribes to the Special Data Dissemination Standard (SDDS) since January 2010 and publishes data on its National Summary Data Page.
- Overall staff assessment: the data provided to the Fund have some shortcomings but are broadly adequate for surveillance.
- Specific shortcomings and needs:
  - More granularity on fiscal, national account, external sector, and financial data would be useful for more thorough analysis.
  - Progress has been made in improving quarterly estimates of the national accounts from the production approach; Jordan is yet to release quarterly national accounts from the expenditure approach.
  - The Department of Statistics (DoS) has compiled annual supply and use tables at current prices for the period 2017-2021.
  - Further efforts are needed to ensure that the compilation of the national accounts is compliant with the System of National Accounts 2008 (2008 SNA).
- Corrective actions and capacity development priorities:
  - Authorities have received technical assistance (TAs) from METAC and the IMF to improve national account data.
  - Work underway includes rebasing of national accounts, expanding coverage of the producer price index, and updating the consumer price index.
  - IMF technical assistance provided to include the informal sector in GDP data and to expand coverage of remittances and foreign investment to reduce errors and omissions in external sector statistics.
  - Expansion of monetary and financial statistics by compiling data on other financial corporations is in progress.
  - Recommendation: continue work on the expenditure-side GDP decomposition and publish these data in a timely manner.
- Use of data in Article IV consultations: staff used the official statistics available to staff.
- Other data gaps: no major data gaps identified; household or business surveys can be updated every few years depending on authorities' capacity; need to enhance data collection on the informal sector and financial risks.

### Data Standards Initiatives and metadata
- The latest SDDS Annual Observance Report is available on the Dissemination Standards Bulletin Board.
- The document records questionnaire- and heatmap-based assessments of data quality characteristics (granularity, consistency, frequency and timeliness, coverage) using the IMF’s standardized scoring system.
- Note: when a questionnaire did not include a specific dimension of data quality for a sector, the corresponding cell is blank.
- The top/bottom cell convention is used in the granularity assessments to distinguish between operations and public debt (for government finance statistics) and between MFS and Financial Soundness indicators (for monetary and financial statistics).

### Table of Common Indicators required for surveillance
- As of November 8, 2024, the document lists common indicators required for surveillance, including:
  - Exchange Rates
  - International Reserve Assets and Reserve Liabilities of the Monetary Authorities
  - Reserve/Base Money; Broad Money; Central Bank Balance Sheet; Consolidated Balance Sheet of the Banking System; Interest Rates; Consumer Price Index
  - Revenue, Expenditure, Balance and Composition of Financing — General Government and Central Government
  - International Investment Position; Stocks of Central Government and Central Government-Guaranteed Debt; External Current Account Balance; Exports and Imports of Goods and Services; GDP/GNP; Gross External Debt
- Frequency and timeliness classifications and country-specific reporting expectations are documented (e.g., daily “D”, weekly “W”, monthly “M”, quarterly “Q”, annual “A”), with country entries and expected timeliness noted as of the observations in the table.

### Macroeconomic outcomes, projections, and program policy commitments (from Letter of Intent and MEFP)
- Recent environment and program context:
  - The war in Gaza has continued and expanded, increasing uncertainty and exerting a marked adverse effect on regional economic activity, including in Jordan.
  - Despite the external shock, Jordan’s economy has shown resilience and stability owing to sound macroeconomic policies and reform progress.
- Growth and external sector projections:
  - 2024 growth: 2.3 percent, reflecting a strong performance in net exports offsetting weaker domestic demand.
  - 2025 growth: 2.5 percent.
  - Current account deficit 2024: 4.3 percent of GDP.
  - Current account deficit 2025: projected to widen slightly to 4.5 percent of GDP.
  - With stronger exports and remittances and lower imports, the current account deficit is projected to narrow relative to earlier projections in 2024.
- Inflation and monetary policy:
  - Inflation remains low, at below 2 percent.
  - Inflation expected to end 2024 at close to 2 percent and to remain stable at close to 2 percent in 2025.
  - The Central Bank of Jordan (CBJ) maintains a firm commitment to monetary stability and the exchange rate peg to the US dollar, adjusting policy rates in tandem with the U.S. Federal Reserve as needed.
- Fiscal outcomes, revisions, and targets:
  - 2024 central government primary deficit (excluding grants and transfers to public utilities): expected to be contained at 2.9 percent of GDP, up from 2.7 percent of GDP in 2023.
  - 2024 combined public sector primary deficit (reflecting measures to limit operational losses of utility companies): expected to be contained at 4.8 percent of GDP, compared to 4.5 percent of GDP in 2023.
  - 2024 overall general government primary surplus (including grants): projected at 0.6 percent of GDP, up from 0.5 percent of GDP in 2023.
  - Public debt by end-2024: contained at 90.5 percent of GDP.
  - 2025 central government primary deficit (excluding grants and transfers to public utilities) target: 2.0 percent of GDP (a reduction by 0.9 percent of GDP from 2024).
  - 2025 combined public sector primary deficit target: reduction by 1.2 percent of GDP to 3.6 percent of GDP.
  - 2025 overall general government primary surplus (including grants) target: 1.8 percent of GDP.
  - Public debt by end-2025: expected around 90 percent of GDP.
  - Medium-term debt objective: reduce public debt to below 80 percent of GDP by 2028.
- Program financing and requests to IMF:
  - Request for completion of the second review under the Extended Fund Facility and approval to make a purchase in the amount of SDR 97.784 million.
  - Requests to modify end-December 2024 and end-June 2025 performance criteria on CBJ’s net international reserves and on the central government’s primary balance and the combined public balance to reflect the revised fiscal path (details in attached MEFP).
  - Program monitoring: semi-annual quantitative performance criteria, structural benchmarks, and quarterly indicative targets as attached to the MEFP.
  - Expected timing: third review on or after April 1, 2025; fourth review on or after October 1, 2025.
- Structural and reform commitments:
  - Continue gradual, progressive, and equitable fiscal consolidation started in 2021, while providing targeted support for vulnerable households and public investment.
  - Improve financial sustainability of public utilities.
  - Increase revenue mobilization in coming years to ensure fiscal sustainability while supporting growth and vulnerable households.
  - Measures to boost private sector dynamism and job creation, including amendments to the labor law (to enhance labor market flexibility and female labor participation), social security law (to strengthen unemployment insurance and harmonize benefits), and competition law (to improve the independence and effectiveness of the competition authority).
  - Continue improving the business environment by enhancing competition and streamlining regulations and licensing requirements.
- Social and labor market indicators:
  - Unemployment rate: just over 21 percent.
  - Youth unemployment: 42 percent.
  - Female unemployment: 31 percent.
  - Medium-term growth objective: accelerate growth to 3 percent over the medium term to generate jobs and improve living standards.

*Source: Annex IX . Data Issues and associated Letter of Intent and Memorandum of Economic and Financial Policies (Jordan).*

### 4. Our performance under the IMF-supported program remains strong, despite the

### 4. Our performance under the IMF-supported program remains strong, despite the

### Performance under the IMF-supported program
- All end-June 2024 quantitative performance criteria (QPCs) were met for:
  - the primary fiscal deficit of the central government;
  - the combined public deficit;
  - the CBJ’s net international reserves (NIR);
  - the non-incurrence of external debt service arrears.
- All but one indicative target (IT) for end-June 2024 were observed; most ITs for end-September 2024 were met.
- All structural benchmarks (SBs) due by November 2024 were met; progress is being made on future SBs.

### Fiscal policy anchor and debt target
- Commitments:
  - Place public debt on a steady downward path, to below 80 percent of GDP by 2028.
  - Further revenue mobilization, improve spending efficiency, and ensure financial viability and efficiency of public utilities and the Social Security Corporation (SSC).

### 2024 outturns and adjustments
- Approved 2024 central government budget targeted a primary deficit (excluding grants) of 2.1 percent of GDP.
- Revenues are projected to fall short by around 1½ percent of GDP, exceeding the shortfall projected at the time of the first review.
- Revenue shortfall drivers:
  - lower sales taxes due to lower consumption (and imports) and tourist spending because of the longer-lasting conflict and increased regional tensions (about 0.6 percent of GDP);
  - lower profit taxes and royalties due to a decline in global fertilizer prices (about 0.6 percent of GDP);
  - lower sales, fuel and tobacco taxes due to an accelerating shift to electric vehicles and e-cigarettes (about 0.5 percent of GDP).
- Mitigating measures already taken:
  - reduced capital spending by over 1 percent of GDP;
  - raised special taxes on electric vehicles and e-cigarettes effective September, expected to yield almost 0.2 percent of GDP in 2024.
- Resulting 2024 projections:
  - primary deficit (excluding grants and transfers to the public utilities) projected to be contained at JD 1,100 million, or 2.9 percent of GDP (up from 2.7 percent of GDP last year);
  - combined public deficit projected at JD 1,808 million, or 4.8 percent of GDP (including utility losses).

### Recalibrated fiscal path and 2025 budget
- 2025 central government budget submitted to parliament consistent with:
  - reduction in the primary deficit (excluding grants and transfers to the public utilities) to JD 812 million, equivalent to 2.0 percent of GDP.
- Revenue measures to generate 1 percent of GDP include:
  - recent decision to raise special taxes on electric vehicles and e-cigarettes, estimated to yield about 0.8 percent of GDP;
  - deferring a further reduction in customs tariffs;
  - accelerating the collection of tax arrears;
  - improving revenue administration, including further digitalization and strengthening compliance management.
- Room created for capital spending recovery and additional social support.
- With utility losses narrowing to 1.1 percent of GDP, combined public deficit projected to fall to JD 1,438 million, or 3.6 percent of GDP in 2025.

### Medium-term consolidation (2026–28)
- Commitment to continued steady fiscal consolidation entailing:
  - annual fiscal adjustment of about 0.9–1 percent of GDP;
  - bringing the general government primary balance (excluding grants) from a deficit of 1.3 percent of GDP this year to a surplus of 3.4 percent of GDP in 2028.
- Revenue-broadening measures to be implemented:
  - harmonizing various license and registration fees to remove distortions;
  - addressing tax gaps, based on IMF technical assistance;
  - continuing to improve tax and customs administration.
- Planned diagnostic and strategy:
  - a revenue diagnostic study with support from the IMF’s Fiscal Affairs Department;
  - development and adoption of a Medium-Term Revenue Strategy (MTRS) consistent with meeting fiscal objectives (SB for September 2025).

### Fiscal discipline, public administration, and social spending safeguards
- Fiscal rules and operational measures:
  - refrain from reallocating capital spending to current spending;
  - use overperformance in revenue to pay off more expensive debt or increase capital spending; use additional grants to replace more expensive financing;
  - contain growth of the civil service wage bill to the rate of inflation.
- Public sector reform:
  - operationalized the Service and Public Administration Commission (SPAC) replacing the Civil Service Bureau;
  - SPAC council approved the Commission’s strategic plan for 2024–27;
  - launched an automated HR management information system (HRMIS) containing up-to-date civil service data;
  - since start of 2024, all hiring and promotion decisions for all senior positions are based on position qualifications, competencies, and merit (met SB for March 2024);
  - implement a job description and performance-based salary-setting mechanism for all Category 1 civil service employees based on qualifications, competencies, and merit (SB for December 2024).
- Minimum threshold for social spending (IT) components:
  - non-wage components of the education and health sectors’ current expenditure envelope;
  - the National Aid Fund’s (NAF) and other entities’ social protection programs;
  - the school feeding program.
- Social protection developments:
  - number of families covered through the NAF reached almost 200,000 households in 2024, an increase of about 15,000 households from last year;
  - allocation to NAF in the 2025 budget increased to cover an additional 15,000 households;
  - NAF to improve targeting formula with World Bank support and upgrade/expand the National Unified Registry (NUR);
  - finalizing establishment of a voluntary unified platform for social assistance, open to CSOs providing support to vulnerable households;
  - centralized process for granting health care exemptions and establishing rules for pricing medical services for exempted people consistent with prices charged to people with medical insurance (SB for May 2025).
- SSC reforms:
  - conducting an actuarial review of the Social Security Corporation (SSC) with ILO and World Bank support;
  - develop parametric reforms with assistance from IMF, World Bank, and ILO to ensure SSC’s long-term financial viability while ensuring adequate retirement benefits and strengthening incentives to contribute.

### Revenue administration reforms and IT upgrades
- Objectives: increase revenue collection by broadening the revenue base and improving compliance via digitalization and data analysis.
- Specific measures and timelines:
  - upgrade ISTD IT infrastructure and implement a new Integrated Tax Administration System (ITAS); procurement in pre-qualification with finalization expected by September 2025.
  - expand application of new transfer pricing rules:
    - Phase I applied to multinationals and related parties;
    - Phase II applied to mid-sized companies, including family-owned companies;
    - Phase III to be completed by September 2025 to extend to related parties.
    - ISTD conducting information campaigns, posting guidelines, and providing training.
  - curb smuggling:
    - digital track-and-trace systems introduced for tobacco products and alcohol (met SB for March 2024);
    - biochemical markers introduced to kerosene to reduce diesel smuggling and counterfeiting (met SB for November 2024), with full implementation by March 2025.
  - auditing modernization:
    - move from traditional and sample-based auditing to risk-based auditing with an AI-based e-audit system and well-defined benchmarks covering all tax returns;
    - comprehensive Risk Management methodology developed and implemented.
  - e-invoicing:
    - launched e-invoicing system for all sales transactions subject to GST covering 95 percent of all sales transactions by value by mid-2024;
    - on track to mandate coverage of 100 percent of sales transactions and issue regulations requiring e-invoices for all expenses reported in tax declarations (SB for March 2025).
  - data sharing:
    - ISTD and Customs Administration entered into a data sharing agreement by end-June 2024 (met SB for September 2024).

### Customs, trade facilitation, and border management
- Outcomes and ongoing actions:
  - restructuring in customs tariffs and inclusion of ASEZA zone increased revenues, notably in GST collection.
  - National Single Window already encompasses 11 government entities (out of 55 entities but covering more than 90 percent of clearance activity); by 2026 will also encompass 5 agencies under the Ministry of Interior.
  - establishment of the single border authority to facilitate expedited and predictable goods clearance through mandatory use of a digital licensing hub platform for 5 largest control entities (JSMO, Ministry of Environment, JFDA, Ministry of Agriculture, Customs) (met SB for September 2024).
  - draft amendments to the Customs Law to strengthen implementation of a new Post-Clearance Audit (PCA) regime to be submitted to Parliament by end-September 2025.
  - data exchanges initiated with seven countries and creation of a database for declarations to improve valuation control and prevent under-invoicing.
  - introduction of electronic certificates of origin.
  - implement last phase of Unification of Border Management Initiative by December 2025, establishing Jordan Customs as the only authorized border clearance entity for physical inspections and risk management.

### Public financial management improvements
- Fiscal transparency and fiscal risk management:
  - Ministry of Finance’s Macro-Fiscal Unit prepared the 2024 Fiscal Risk Statement, building on 2023 statement and expanding coverage of contingent liabilities from the SOE sector.
  - adopt and publish an SOE ownership policy and assign monitoring/oversight of SOE performance and risks to the Fiscal Commitments and Contingent Liabilities (FCCL) unit (SB for March 2026).
  - require submission of annual audited statements to the SOE Monitoring Unit and publication of these statements.
  - establish a centralized database of all PPP contracts concluded since the 2020 PPP law with analytical tools.
- Public investment management:
  - drawing on recommendations from the 2017 PIMA, 2020 PIMA follow-up, and 2023 Climate PIMA.
  - amended PPP legislation to streamline execution while maintaining safeguards; ensure all new PPP projects proceed through the NRIP process.
  - project management circular: all capital projects included in the 2025 budget approved by PIM and registered in the NRIP (met SB for September 2024).
- Cash management and arrears prevention:
  - electricity payments of budgetary spending units are made by the Ministry of Finance’s treasury department, deducting payments from spending units’ allocations;
  - spending units required to seek approval from the General Budget Department prior to issuing commitment vouchers;
  - Ministry of Finance will adjust allocations based on quarterly updated cash forecasts and approved commitments and use forecasts for procurement approvals;
  - adopted new definition of spending arrears: time limit on overdue payments of 60 days covering Central Government Spending Units.
  - seek IMF assistance to improve the medium-term expenditure framework with focus on capital expenditure budget projections and utilization.
  - use Jordan National E-Procurement System (JONEPS) data to prepare annual procurement and commitment plans considering multi-year commitments to control budget implementation and minimize arrears.
  - roll out JONEPS for all government entities by end-December 2025; implementation work with municipalities, including GAM, started in 2024 with training of key users.

### Monetary policy and financial stability
- CBJ policy stance and exchange rate regime:
  - continue monetary policy aimed at preserving monetary and financial stability underpinned by the exchange rate peg to the US dollar.
  - exchange rate peg provides a credible nominal anchor; inflation below two percent has shielded citizens from large cost-of-living increases experienced elsewhere.
  - deposit dollarization at just under 18 percent.
  - reserves comfortably above 100 percent of the IMF Reserve Adequacy metric.
  - as the US Federal Reserve relaxes policy rate, the CBJ will follow with gradual easing to create space for increased credit.
  - CBJ will gradually reduce concessionality of its remaining preferential lending scheme, initially with an increase of 50 basis points of the interest rate on new loans issued under the scheme as soon as the regional conflict subsides.
  - CBJ will not introduce or intensify restrictions on payments and transfers for current international transactions, introduce or modify multiple currency practices, enter into bilateral payment agreements inconsistent with Article VIII of the IMF Articles of Agreement, and/or introduce or intensify import restrictions for balance of payments purposes.
  - CBJ remains ready to undertake policy adjustments to safeguard monetary and financial stability and bolster international reserves, including managing banking system liquidity.

### Banking system soundness and prudential measures
- Financial sector assessment:
  - Joint IMF-World Bank FSAP completed March 2023 found the banking sector broadly resilient and able to withstand large external shocks.
- Key indicators as of end-June 2024:
  - system-wide capital adequacy ratio: 17.6 percent (regulatory minimum 12 percent).
  - non-performing loans (NPLs): 5.6 percent (increase of half a percentage point).
  - provisions for NPLs (coverage ratio): 73.1 (compared to 75.6 percent at end-2023).
- Prudential practices:
  - CBJ maintained stringent provisioning standards in line with IFRS9’s forward-looking expected loss approach.
  - CBJ continues to strengthen prudential regulations in line with the FSSA recommendations.

*IMF staff summary of Chapter 4 from 1jorea2024003-print-pdf*

### 12. We will further strengthen the resilience of the financial sector in line with the

### 12. We will further strengthen the resilience of the financial sector in line with the recommendations of the FSSA, by continuing to strengthen systemic risk analysis, financial sector oversight, and crisis management.

### Financial sector resilience, oversight, and crisis management
- The multi-agency crisis management committee (CBJ, Ministry of Finance, JODIC) meets twice per year to coordinate inter-institution crisis preparedness and management.
- CBJ actions and timelines:
  - Aligned prudential requirements on asset classification with Basel Core Principles (BCPs) and guidance (met SB for June 2024).
  - Introduce Pillar 2 risk assessment methodologies to make capital assessments more sensitive to individual banks’ risk profiles (SB for November 2025).
  - With IMF MCM technical assistance, align prudential requirements for concentration risk and related party exposure with BCPs (SB for November 2026).
  - Design and operationalize procedures for the compensation of depositors together with JODIC (SB for November 2026).
- Data collection and systemic risk monitoring:
  - Collect additional data for: (i) top-down bank stress testing on a globally consolidated basis; (ii) probabilities of default, including on more granular loan portfolios; (iii) analysis of nonfinancial corporate vulnerabilities to a broader set of firms; (iv) household vulnerabilities at a more granular level.
  - CBJ will address remaining data gaps by March 2027 to further incorporate cross border dimensions and interconnectedness in systemic risk monitoring, with technical assistance from the IMF's Monetary and Capital Markets Development.
- Liquidity and payments system:
  - CBJ has started monitoring the Liquidity Coverage Ratio (LCR) by significant currency and will analyze FX liquidity separately from total liquidity.
  - Strengthened Financial Stability Committee (FSC): expanded membership to include the Finance Companies and Credit Bureaus Supervision Department and the Insurance Supervision Department; FSC conducts semi-annual meetings and is refocused on macroprudential policies and systemic risks.
  - CBJ is establishing a risk-management framework for RTGS-JO to comprehensively manage legal, credit, liquidity, operational, and other risks by March 2026.

### Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT)
- Jordan removed from the FATF gray list in October 2023.
- Implemented all action items in Jordan’s FATF action plan.
- Continuing to enhance effectiveness of the AML/CFT framework, including strengthening risk-based AML/CFT supervision and increasing international cooperation.

### MSME finance and development finance initiatives
- Will collect disaggregated data on MSME lending from all supervised entities to inform measures to increase MSME access to finance.
- Ministry of Finance and MOPIC, in consultation with CBJ, are working with development partners to assess designing a well-governed, arm’s length wholesale funding facility to support Micro Finance Institutions (MFIs) and other regulated non-bank credit institutions.
- Comprehensive review of development finance initiatives to rationalize initiatives and strengthen governance.
- Corporate credit reports made easily accessible to companies through digital channels; Credit Bureau data collection to be further enhanced.
- Explore introducing implementing rules for lending-based crowdfunding in addition to recently adopted law on secure transactions.

### Financial markets development
- Aim to develop a secondary market for government securities as a step toward further financial market development.
- Requested IMF MCM and FAD technical assistance, starting with an assessment of the building blocks for an active local currency bond market.

### Electricity sector reform, efficiency, and NEPCO sustainability
- Progress achieved: improved network reliability, diversified generation sources, and implementation of Phase 1 of the Government Program for Electricity Sector Efficiency, Supply Reliability, and Financial Sustainability for 2023–30 (adopted in 2022–24).
- Time-of-use tariff rollout and smart meters:
  - Time-of-use tariffs rolled out for electric vehicles and industrial sectors in July 2024, capturing over 15 percent of total electricity consumption (met SB met for July 2024).
  - Further roll out to capture at least 30 percent of total electricity consumption, effective January 1, 2025 (SB for January 2025).
  - Complete installation of smart meters for the residential sector by end-2025 (SB for June 2026).
  - Apply time-of-use tariffs to all sectors, including residential, by September 2026 (SB for September 2026).
  - Strengthening enforcement to reduce non-technical losses due to tampering with electricity meters.
- Renewable Energy Law amendment:
  - Effective September 2024, switched from net metering to net billing for new self-generators (met SB for September 2024).
- Other electricity sector measures:
  - Continued review of distribution companies’ licenses to achieve higher bulk supply tariffs charged by NEPCO.
  - Introduced a legally and regulatorily permissible levy on electricity generation companies, effective January 2025 (met SB for April 2024).
  - Spun off gas infrastructure into a separate entity in March 2024, reducing NEPCO’s gas costs.
  - Increased electricity grid interconnections with neighboring countries, including Egypt and Iraq.
  - Exploring leasing NEPCO’s fiber optics infrastructure to generate additional revenue.
- NEPCO financial targets and roadmap:
  - Committed to reduce NEPCO’s operational losses to below 0.8 percent of GDP by 2028.
  - Adopted implementation roadmap for electricity sector cost reduction and efficiency improvement (met SB for October 2024).
  - Key roadmap measures:
    - Expand time-of-use tariff scheme to capture all sectors.
    - Define and implement approaches to optimize conventional and renewable PPAs.
    - Reduce technical losses in distribution companies to a target of 9 percent.
    - Reduce operational costs for distribution companies.

### Water sector reforms and National Water Strategy (NWS)
- Progress aligned with the Cabinet-approved Financial Sustainability Roadmap (FSR) and MoU with the US.
- Targets for cost recovery:
  - Aim for full cost recovery of water and wastewater services’ operations and maintenance by 2030 (including O&M of BOT projects).
  - Aim to recover all costs, including capital costs of BOT projects, by 2040.
- Specific measures and outcomes:
  - Reduced non-revenue water (NRW) cumulatively by 5.2 percent by mid-2024 since mid-2022, and will continue to reduce NRW by 2 percent per year, to 37 percent and 25 percent by 2030 and 2040, respectively.
  - Second increase in water tariffs to be implemented in December 2024; shifted from quarterly billing to monthly billing.
  - Improving operational efficiency of water distribution companies, including testing performance-based contracts.
  - Implementing agricultural water reduction strategy: increase treated wastewater use, reduce unauthorized freshwater use, highland and desert groundwater conservation, and rotational fallowing in highland and desert areas.
  - Committed to arresting accumulation of water sector arrears, including through timely cash transfers from MOF to WAJ.
  - Selected preferred bidder for the Aqaba Amman Conveyor project; aim to finalize negotiations by the end of 2025 and for the project to come online by the end of 2029.

### Structural policies to promote jobs, investment, and business environment
- Improve private sector dynamism and job creation by improving business environment to attract foreign and domestic investment.
- Investment and licensing measures:
  - Continue bilateral negotiations to relax restrictions on foreign ownership and expedite applications for full foreign ownership consistent with Regulation No.7 of 2023; exclusions apply for national security/public safety or other laws.
  - Launched an online one-stop-shop platform for investment applications; will further enhance functionality and investor experience.
  - Requested legal interpretation of Article 157 and related Companies Law articles from the Special Bureau for Interpreting Laws to align owners’ liability with international best practices (met SB for May 2024); interpretation expected by February 2025.
  - Reduced and streamlined licensing requirements; submitted legislation to abolish licenses in the tourism sector (met SB for March 2024).
  - Abolished licensing for libraries, cultural and sport activities, and streamlined licensing for food, childcare, and private education sectors (met SB for September 2024).
  - Ensure application processes via the Investment Platform are aligned with the Investment Law time boundaries and completed within 15 days.
  - Adopt a plan to further abolish and simplify sectoral licensing requirements by February 2025 and ensure approval time for license applications will not exceed 30 days.
- Competition and regulatory reforms:
  - Adopt by February 2025 a roadmap to enhance competition in hydrocarbon derivative and transport sectors, based on Competition Directorate reviews with World Bank support.
  - Range of measures under consideration: licensing regime for transport providers, limitations on operators and loads, and minimum indicative prices.
  - LTRC and Competition Directorate to sign an MoU by February 2025.
  - Draft amendments to the Competition Law to strengthen Competition Directorate authority; aim to submit legislation to Parliament by October 2025 (SB for October 2025) and develop by-laws and regulations in parallel.
- Digitalization and government services:
  - Continue to materially streamline registration and closure of businesses.
  - Aim to complete digitalization of all automatable government services by end-2025 (SB for December 2025).
  - Launched a unified gateway to digitized government services in 2022.
  - Operationalize a centralized system to streamline and manage government billing and enable digital payment through CliQ/JoMoPay, Card, and eFAWATEERcom.

### Labor market reforms and social protections
- Labor law and protections:
  - Parliament passed amendments; issued instructions and guidelines to companies to: (i) enhance protections for women from harassment and violence in the workplace; (ii) remove restrictions on female employment in certain professions and industries; (iii) expand protections for pregnant women and persons with disabilities.
  - Drafted amendments to the Labor Law to increase labor market flexibility and allow flexible work arrangements, in consultation with IMF, World Bank, and ILO; plan to submit to Parliament in September 2025 (SB for September 2025). Amendments aim to ensure childcare provisions do not create obstacles to formal employment.
- Social Security Law reforms:
  - Drafted amendments to be submitted to Parliament in September 2025 to: (i) convert unemployment benefit provisions from individual accounts to pooled insurance; (ii) better facilitate flexible work arrangements; (iii) harmonize benefit rights for males and females in an actuarily neutral way (SB for September 2025).
  - Review pay structures within the civil service to harmonize pay scales between male and female employees.
- Social and care work, nurseries:
  - Issued by-laws to formalize and professionalize social and care work to improve services and competitiveness, creating job opportunities, particularly for women.
  - Issued a by-law streamlining licensing for regular nurseries, extended working hours, and facilitated registration of home-based nurseries by reducing requirements and adopting a post audit procedure.
- Work permits and migration for skills:
  - Conduct comprehensive review of framework and regulations governing work permits (including high-skilled non-Jordanians) to streamline procedures, extend durations, and reduce costs.
  - Amend work permit regulations for skilled non-Jordanians by limiting approval time to a maximum of 15 working days, allowing a two-year work permit, and reducing fees to JD 1,500 per year, by February 2025.
  - Explore options to enable private companies to provide public transport services, including minibuses and female-only buses, by streamlining transport sector licensing.

### Governance, transparency, and beneficial ownership
- Strengthen Integrity and Anti-Corruption Commission (IACC) resourcing and implement amendments to the Illicit Gains Law (August 2021) and the IACC law (enacted in 2022).
- Aim to criminalize illicit gains from public procurement.
- Companies Control Department (CCD) amendments in 2022 require submission of beneficial owners and establishment of the Beneficial Owner Registry system.
- CCD instructed companies to disclose beneficial owners per Beneficial Owner Registry regulation (bylaw No. 62 of 2022, in effect February 2023), coordinated with EU experts and in compliance with FATF standards; ensure information is kept up to date.

### Economic statistics and data enhancements
- Department of Statistics (DoS) updates and targets:
  - Updated national accounts statistics benefiting from better information in producers of government services sector and implementing expenditure approach to GDP aggregation via supply and use tables at current prices.
  - Continue improving primary statistics from annual industry surveys and consistency with quarterly surveys; include estimates on the informal sector in GDP data with METAC technical assistance.
  - Adhere to regular publication and revision schedule, including revisions to quarterly GDP based on annual GDP estimates.
  - Update base year of national accounts to 2023.
  - Aim to compile and disseminate the annual expenditure approach of GDP at constant prices by December 2026 and the quarterly approach at current and constant prices by December 2027.
- Data sharing and CBJ enhancements:
  - Established MoUs for DoS access to MOF, ISTD, CCD and CBJ data sources with clear schedule for data dissemination.
  - ISTD will share monthly sales data from general and special sales taxes with DoS at 4-digit ISIC level starting December 2024 to improve GDP coverage.
  - CBJ improved coverage of remittances and FDI in Balance of Payments statistics.
  - Survey of Other Financial Corporations to be incorporated into CBJ monetary statistics starting December 2024.
  - CBJ will compile a high frequency indicator (monthly index) of economic activity by December 2025, with IMF technical assistance.

*Source: 1jorea2024003-print-pdf - 12. We will further strengthen the resilience of the financial sector in line with the*

### 23. Progress in the implementation of our policies that are supported by the EFF arrangement

### 23. Progress in the implementation of our policies that are supported by the EFF arrangement

### Monitoring framework and data provisions
- Program monitoring instruments:
  - Semi-annual reviews, quantitative performance criteria (QPCs), indicative targets (ITs), and structural benchmarks (SBs).
  - Definitions and data requirements provided in the attached Technical Memorandum of Understanding (TMU).
- Use of IMF resources:
  - IMF disbursements will be used for budget support during the program period.
- Institutional arrangements and data provision:
  - Memorandum of Understanding between the CBJ and the Ministry of Finance on responsibilities for servicing financial obligations to the IMF.
  - Timely data provision is key to the success of the programs.
  - To strengthen monitoring of subsidies cost, the Ministry of Finance will provide IMF staff with monthly data on wheat and barley purchases together with tender details and proceeds from sales to the mills (TMU ¶58).
  - The authorities will produce and share quarterly and annual financial results of the electricity sector (NEPCO and the three distribution companies), and the water sector without delay, to allow for timely program monitoring.

### Quantitative performance criteria and indicative targets (overview)
- Table 1 reports QPCs and ITs under the 2024 EFF Arrangement (see attached Table 1 in source).
- The TMU specifies the following program performance criteria and indicative targets (as defined in the MEFP Table 1):
  - A 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.
  - A performance criterion (ceiling) on the combined primary deficit of the central government, the operational loss of NEPCO, the overall deficit of WAJ, and the overall deficit of Aqaba, Miyahuna, and Yarmouk water companies (“combined public deficit”).
  - A performance criterion (floor) on the net international reserves (NIR) of the Central Bank of Jordan (CBJ).
  - A continuous performance criterion (zero ceiling) on the accumulation of external debt service arrears.
  - An indicative target (floor) on social spending by the central government.
  - An indicative target (ceiling) on public debt, net of SSC’s holdings of government debt.
  - An indicative target (ceiling) on the domestic payment arrears of NEPCO.
  - An indicative target (ceiling) on the domestic payment arrears of WAJ.
  - An indicative target (ceiling) on the domestic payment arrears of Aqaba, Miyahuna, and Yarmouk water companies.
  - An indicative target (ceiling) on the net domestic assets (NDA) of the CBJ.
- Monitoring frequency and basis:
  - Central government primary fiscal deficit, combined public deficit, and social spending indicators are monitored semi-annually (with ITs for other quarters) on a cumulative basis from the beginning of the calendar year.
  - NIR, public debt, short-term public debt, domestic payment arrears of NEPCO, WAJ, and Aqaba/Miyahuna/Yarmouk, and NDA of the CBJ are monitored semi-annually (with ITs for other quarters) in terms of stock levels.
  - The performance criterion on accumulation of external debt service arrears is monitored continuously.

### Definitions and measurement (selected)
- Central government and fiscal measurement:
  - The central government is the budgetary central government covered by the annual General Budget Law (GBL); operations 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 stated-owned water sector.
  - Net external financing of the central government: cash external debt disbursements received by the central government, less external debt repayments paid by the central government.
  - Receipts from sale of government assets: includes receipts from the sale of shares, the sale of non-financial assets, leases and the sale of licenses or exploration rights with duration of 10 years and longer.
  - Net domestic bank financing: change in the banking system’s claims in Jordanian dinars and in foreign currency on the central government, net of the balance of the General Treasury Account 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, specifically, the Social Security Investment Fund); equivalent to the cumulative change from the level existing on December 31 of the previous year in the stocks of government debt held by nonbanks and in the float.

### Structural benchmarks: status and examples
- Structural Benchmarks for the First Review (selected entries):
  - ISTD to introduce a digital track-and-trace system for alcohol. March 2024 Met
  - Effective January 1, 2024, all hiring and promotion decisions for all senior civil service positions will be based on professional qualifications and performance, in line with the Public Sector Modernization Roadmap. March 2024 Met
  - Submit to parliament legislation to abolish licenses in the tourism sector as identified in the 2019 cabinet decision. March 2024 Met
  - Based on the legislative and contractual analysis, cabinet to adopt a plan to reduce the cost of electricity generation born by NEPCO. April 2024 Met
  - Based on a legislative and contractual analysis, introduce a legally and regulatory permissible levy on electricity generation companies. April 2024 Met
  - Request a legal interpretation of Article 157 and any other related articles of the Companies Law related to the liability of owners of limited liability companies ... May 2024 Met
- Structural Benchmarks for the Second Review (selected entries):
  - The CBJ to align prudential requirements on asset classification with Basel Core Principles and guidance. June 2024 Met
  - Apply time-of-use tariffs to capture at least 15 percent of total electricity consumption. July 2024 Met
  - ISTD and Customs Administration to enter into a data sharing agreement. September 2024 Met
  - Issue a project management circular to ensure that all capital projects included in the 2025 budget are approved by PIM and registered in the NRIP. September 2024 Met
  - Introduce and apply an economically efficient tariff design ... by switching from net metering to net billing. September 2024 Met
  - Cabinet to adopt an implementation roadmap for electricity sector cost reduction and efficiency improvement ... October 2024 Met
  - Introduce biochemical markers to diesel. November 2024 Met
- Structural Benchmarks with due dates after the Second Review (selected entries; status not met/blank where not indicated):
  - Implement a performance-based salary-setting mechanism for all Category 1 civil service employees ... December 2024
  - Apply time-of-use tariffs to capture at least 30 percent of total electricity consumption. January 2025
  - ISTD to mandate e-invoices for 100 percent of sales transactions ... March 2025
  - Establish rules for setting prices for medical services provided to people covered by the exemptions ... May 2025
  - Develop and adopt a Medium-Term Revenue Strategy ... September 2025
  - Submit amendments to the labor law ... September 2025
  - Submit amendments to the social security law ... September 2025
  - Submit legislation to parliament to strengthen the authority of the Competition Directorate ... October 2025
  - The CBJ to introduce Pillar 2 risk assessment methodologies ... November 2025
  - Complete the digitalization of all government services. December 2025
  - Adopt and publish an SOE ownership policy and assign monitoring and overseeing the performance and risks ... March 2026
  - Complete the installation of smart meters for the residential sector. June 2026
  - Apply time-of-use tariffs to cover all sectors, including the residential sector. September 2026
  - The CBJ to align prudential requirements for concentration risk and related party exposure with Basel Core Principles. November 2026
  - The CBJ to design and operationalize procedures for compensation of depositors, together with JODIC. November 2026

### Technical Memorandum of Understanding: exchange rates, gold price, and debt definition
- Exchange rate and gold price for program measurement (As of September 30, 2023):
  - The exchange rate of the Jordanian dinar to the U.S. dollar is set at JD 0.709 = $1
  - The gold price is set at JD 1329.335 per fine troy ounce for the measurement of the program performance criterion on net international reserves.
- Program Exchange Rates (As of September 30, 2023) — Jordanian Dinar Per Unit of Foreign Currency:
  - British Pound  0.860760
  - Japanese Yen  0.004747
  - Euro  0.74477
  - Canadian dollar  0.525555
  - SDR  0.929665
  - CNY  0.0970395
- Debt definition for program monitoring:
  - Debt is defined as set forth in paragraph 8(a) of the Guidelines on Public Debt Limits in Fund-Supported Programs attached to Executive Board Decision No. 16919-(20/103), adopted October 25, 2020.
  - The TMU reproduces the guideline definition: debt as a current contractual liability requiring future payments; primary forms include (i) loans, (ii) suppliers’ credits, and (iii) leases (with present value at inception of lease payments), and arrears, penalties, and judicially awarded damages arising from failure to make payment under a contractual obligation that constitutes debt are debt.

*Source: Attachment II. Technical Memorandum of Understanding and Tables 1–2 from the IMF document: 23. Progress in the implementation of our policies that are supported by the EFF arrangement.*

### 23. Net transfers from the central government to NEPCO and the state-owned water

### 23. Net transfers from the central government to NEPCO and the state-owned water sector

### Definition of net transfers
- Net transfers from the central government to NEPCO and the state-owned water sector are calculated as:
  - (i) direct transfers from the central government to NEPCO and the state-owned water sector (or NEPCO and the state-owned water sector’s creditors) on behalf of NEPCO and the state-owned water sector (including subsidies, cash advances, and payment of debt or government guarantees if called),
  - minus (ii) any transfers of cash from NEPCO and the state-owned water sector to the central government (including repayments of debt, arrears or cash advances).

### Adjustors to the ceiling on the central government primary deficit (excluding grants and net transfers to NEPCO and the state-owned water sector)
- Downward by 50 percent of any shortfall when the level of foreign budgetary grants received by the central government during the relevant period falls short of the levels specified in Table 1 of the MEFP.
- Downward by the extent to which 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 any one-off settlement operation (such as the write-off of intra-governmental claims).
- Upward by the extent to which the stock of arrears by WAJ and the distribution companies falls below the projected stock of arrears specified in Table 1 of the MEFP, excluding any one-off settlement operation (such as the write-off of intra-governmental claims).
- Downward by the extent to which the stock of checks issued by the central government but not yet cashed by the beneficiary exceeds JD 200 million (the programmed stock as specified in Table 1 of the MEFP) in case of the end-year indicative target or performance criterion.

### Ceiling on the combined public deficit — definitions
- Combined public deficit = sum of:
  - (i) the primary deficit of the central government excluding grants and net transfers to NEPCO and the state-owned water sector;
  - (ii) the operational loss of NEPCO; and
  - (iii) the overall deficit of the state-owned water sector.
- Operational loss of NEPCO = total operating revenues minus total costs for normal operations (unaudited income statement).
  - Total operating revenues = (i) sales of operating power; and (ii) all other revenue, excluding proceeds from central government transfers or payments of NEPCO’s obligations on NEPCO’s behalf.
  - Total costs = sum of:
    - (i) purchase of electric power, including fuel costs, capacity and energy charges, and all costs related to electricity generation to be borne by NEPCO;
    - (ii) any fuel transportation costs;
    - (iii) depreciation costs;
    - (iv) all other maintenance and operating expenses, including on wages and remuneration of the board of directors, and provisions;
    - (v) interest expense and any other financial costs.
- Overall balance of the state-owned water sector = total revenues minus current and capital expenditures.
  - Total revenues = (i) sales of goods and services; (ii) property income; and (iii) all other revenue, excluding grants and proceeds from central government transfers or payments of WAJ, Aqaba, Miyahuna or Yarmouk water companies’ obligations on their behalf.
  - Current and capital expenditures = sum of:
    - (i) salaries, wages and allowances;
    - (ii) social security contributions;
    - (iii) use of goods and services, including energy costs;
    - (iv) interest payments on domestic and foreign loans;
    - (v) any other expenses, including pensions;
    - (vi) capital expenditures.

### Adjustors to the ceiling on the combined public deficit
- Downward by 50 percent of any shortfall when the level of foreign budgetary grants received by the central government during the relevant period falls short of the levels specified in Table 1 of the MEFP.
- Downward by the extent to which 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 any one-off settlement operation (such as the write-off of intra-governmental claims).
- Downward by the extent to which the stock of checks issued by the central government but not yet cashed by the beneficiary exceeds JD 200 million (the programmed stock as specified in Table 1 of the MEFP) in case of the end-year indicative target or performance criterion.

### Floor on the Net International Reserves (NIR) of the Central Bank of Jordan (CBJ) — definitions and stock
- NIR of the CBJ in U.S. dollars = foreign assets of the CBJ minus its foreign liabilities.
- Foreign assets include: foreign exchange (foreign currency cash, deposits with foreign correspondents, and holding of foreign securities), monetary gold, IMF reserve position, and SDR holdings.
- Excluded from foreign assets: assets that are pledged, collateralized, or otherwise encumbered; CBJ’s claims on resident banks and nonbanks and on subsidiaries or branches of Jordanian commercial banks located abroad; claims in foreign exchange arising from derivatives in foreign currencies vis-à-vis domestic currency; precious metals other than gold; assets in nonconvertible currencies; illiquid swaps; and the outstanding balance of bilateral accounts with the Central Bank of Iraq of USD 1,081.67 million.
- Foreign liabilities of the CBJ include 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 grants received from the GCC and donor term deposits with the CBJ with an original maturity not less than 360 days); the two technical swaps with Citibank Jordan for USD 88.5 million; and amounts received under any SDR allocations received after March 31, 2016.
- Valuation: the stock of foreign assets and liabilities of the CBJ shall be valued at program exchange rates.
- Reported stock: As of September 30, 2024, the stock of NIR amounted to USD 15,587.2 million (at program exchange rates).

### Adjustors to the NIR floors
- Floors on the NIR of the CBJ will be adjusted upward (downward) by the extent to which 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) the levels specified in Table 1 of the MEFP within any calendar year.
- Floors will be adjusted upward by the amount that the outstanding balance of bilateral accounts with the Central Bank of Iraq is repaid, including both principal and interest payments.
- Floors will be adjusted for any delays or changes of external commercial borrowing included in the program.

### Ceiling on the accumulation of external debt service arrears
- External debt service arrears = debt service payments (principal and interest) on 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.

### Floor on social spending by the central government — definition
- Social spending = central government spending on:
  - (i) non-wage components of the 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.

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

### Ceilings on domestic payment arrears
- NEPCO domestic payment arrears: belated settlement of liabilities due under obligation for more than 60 days, or creditor’s refusal to receive a settlement duly offered; includes wages and pensions; social security contributions; tax payments; obligations to banks and other private companies and suppliers.
- WAJ, Aqaba, Miyahuna, and Yarmouk distribution companies: same definition and coverage as above for payments overdue more than 60 days.

### Ceiling on the Net Domestic Assets (NDA) of the CBJ — definitions and adjustors
- Reserve money of the CBJ = (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.
- Net domestic assets of the CBJ = reserve money of the CBJ minus its NIR.
- Adjustors:
  - Upward (downward) by the extent to which the floors on the NIR 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 equals 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 required for program monitoring (selected substantive items)
- Fiscal and government finance:
  - Standard fiscal data tables covering revenue (including expanded information on revenues from oil derivatives, vehicles, and cigarettes), expenditure, balances of government accounts with the banking system, foreign grants, domestic and external amortization and interest, net lending, debt swaps with official creditors, monthly change in stocks and monthly value of stocks of uncashed checks and trust accounts.
  - Government financing information from the Treasury account and any discrepancy between government financial data and monetary survey data (monthly).
- Transfers and sectoral financials:
  - Gross transfers to and from NEPCO and WAJ detailing amounts paid or received in connection with debt transactions, transfers to cover losses, and any amount directed to repay 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).
- Arrears and sector operations:
  - 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.
  - Value and quantity of fuel products consumed by public sector entities from the Jordan Petroleum Refinery Company (monthly).
  - Full unaudited income statement and stock of accounts payable and payments overdue less and more than 60 days (quarterly) for NEPCO, WAJ, and each water distribution company (Aqaba, Miyahuna, Yarmouk).
  - Latest audited income statement signed by the auditor (usually available twice yearly with a six-month delay) for NEPCO, with explanations of any changes from unaudited versions.
  - Full consolidated financial balance of WAJ and the water distribution companies.
  - Breakdown of overdue payments by major creditor, and all overdue payments vis-à-vis the central government (quarterly).
- Energy and trade flows:
  - 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).
- Monetary and external:
  - 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).
  - Outstanding balance of bilateral accounts with the Central Bank of Iraq (monthly).
  - Banking FSI (quarterly; starting 2021 Q1).
- Continuous performance criteria and public debt:
  - Details of official arrears accumulated on interest and principal payments to non-resident creditors (daily, using actual exchange rates).
  - 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).
- Social spending and other macro data:
  - A table on the amount of central government spending on each component of the social spending definition under the program (monthly).
  - Interest rates and consumer prices; exports and imports; travel receipts and tourist arrivals; remittances; outstanding balance of non-resident purchases of domestic treasury bills and bonds; GCC grants received by the CBJ, and grants transferred by the CBJ to the Ministry of Finance (monthly).
- External sector and national accounts:
  - 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 with creditor, borrower, amount and currency, maturity and grace period, interest rate arrangements, and amortization profile (quarterly).
  - National accounts statistics (quarterly).
- Reporting timetables:
  - Weekly data and CD auction data: lag of no more than one week.
  - Monthly and quarterly data: within six weeks for monetary and fiscal variables, within eight weeks for other data (three months for national accounts and balance of payments and external debt statistics).
  - Data related to continuous performance criteria: within one week after the date when the arrear was incurred.
  - Any revisions to previously reported data should be communicated in the context of regular updates.

*Source: IMF country documentation, "23. Net transfers from the central government to NEPCO and the state-owned water sector."*

### 92. Any variable that is mentioned herein for the purpose of monitoring a performance criterion,

### 1jorea2024003-print-pdf - 92. Any variable that is mentioned herein for the purpose of monitoring a performance criterion,

### Fund relations and financial position
- Membership Status: Joined August 29, 1952; Article VIII.
- General Resources Account:
  - Quota: 343.10 SDR Million; 100.00 Percent Quota.
  - IMF’s Holdings of Currency (Holdings Rate): 1,836.46 SDR Million; 535.25 Percent Quota.
  - Reserve Tranche Position: 1.17 SDR Million; 0.34 Percent Quota.
- SDR Department:
  - Net cumulative allocation: 490.92 SDR Million; 100.00 Percent Allocation.
  - Holdings: 29.73 SDR Million; 6.06 Percent Allocation.
- Outstanding Purchases and Loans:
  - Emergency Assistance: 109.33 SDR Million; 31.87 Percent Quota.
  - Extended Fund Facility: 1,384.98 SDR Million; 403.67 Percent Quota.
- Latest Financial Arrangements (selected entries):
  - EFF: Date of Arrangement Jan 10, 2024; Expiration Date Jan 09, 2028; Amount Approved 926.37 SDR Million; Amount Drawn 241.89 SDR Million.
  - EFF: Date of Arrangement Mar 25, 2020; Expiration Date Dec 16, 2023; Amount Approved 1,145.95 SDR Million; Amount Drawn 1,008.71 SDR Million.
  - EFF: Date of Arrangement Aug 24, 2016; Expiration Date Mar 23, 2020; Amount Approved 514.65 SDR Million; Amount Drawn 223.02 SDR Million.
- Overdue Obligations and Projected Payments to Fund (SDR million; based on existing use of resources and present holdings of SDRs):
  - Forthcoming 2024: Principal 50.74; Charges/interest 26.80; Total 77.54.
  - Forthcoming 2025: Principal 156.38; Charges/interest 96.98; Total 253.35.
  - Forthcoming 2026: Principal 135.52; Charges/interest 90.41; Total 225.93.
  - Forthcoming 2027: Principal 188.42; Charges/interest 79.25; Total 267.67.
  - Forthcoming 2028: Principal 200.14; Charges/interest 65.15; Total 265.29.

### Safeguards assessment, exchange rate, and surveillance
- Safeguards Assessment:
  - Assessment completed in June 2024 with respect to the Extended Arrangement under EFF (approved Jan 10, 2024).
  - Finding: the central bank continues to strengthen its safeguards framework; a number of recommendations were made which the authorities committed to address.
- Exchange Rate Arrangements:
  - De jure and de facto: conventional pegged arrangements.
  - The Jordanian dinar is fully convertible and officially pegged to the SDR.
  - In practice, pegged to the U.S. dollar since October 1995 at JD 1 = $1.41044.
  - Jordan has accepted the obligations under Article VIII, Sections 2 (a), 3, and 4, in 1995 and maintains an exchange system free of restrictions on current international transactions and multiple currency practices.
- Last Article IV Consultation: 2020 Article IV consultation concluded by the Executive Board on June 29, 2022.

### Program performance and recent developments (statement highlights)
- Recent external environment:
  - War in the region lasted longer than anticipated, continued in Gaza and expanded into Lebanon; negative impacts on domestic demand, growth, government revenues, and high unemployment.
  - Sharper-than-expected drop in prices of key export commodities adversely affected government revenues.
- Resilience and credibility:
  - Jordanian economy shows resilience and stability attributed to authorities’ economic management, program ownership, and timely support by Fund and partners.
  - Recent credit upgrades by Moody’s and Standard & Poor’s — first in twenty-one years — cited as testimony to credibility of policies and reforms.
- Program performance:
  - Authorities met all end-June 2024 performance criteria.
  - Met all but one of the six end-June 2024 indicative targets.
  - Met most indicative targets for end-September 2024.
  - Met all second review structural benchmarks.
- Development partner support:
  - Predictable, timely, and adequate development partner support is essential, notably to cope with external shocks and hosting 1.3 million Syrian refugees.
  - Emphasis on sustaining international refugee support in line with the Jordan Compact and 2019 London Initiative pledges; appreciation noted for Box 2 in the report emphasizing this importance.

### Fiscal policy, consolidation, and reforms
- Fiscal consolidation achievements:
  - Central government primary deficit more than halved to 2.7 percent of GDP over the period 2020 to 2023.
  - Key features: strong revenue mobilization by broadening the tax base and strengthening tax administration; containment of current spending by removing fuel subsidies and rationalizing food subsidies; expansion of social safety net coverage.
- Fiscal commitments and targets:
  - Authorities committed to placing public debt on a steady downward path and bringing it to below 80 percent of GDP by 2028.
  - 2025 budget submitted to parliament includes a reduction in the primary deficit by 0.9 percent of GDP to 2.0 percent of GDP, while expanding social assistance through the National Aid Fund.
- Measures taken to offset revenue shortfall:
  - Adoption of tax measures and reduction of capital spending to avoid widening this year’s budget deficit.
  - Commitment to resume gradual fiscal consolidation and address remaining distortions and tax gaps.
  - Development and adoption of a Medium-Term Revenue Strategy with IMF technical support (planned).
- Public financial management and SOE policy:
  - Strict measures to avoid arrears accumulation.
  - Expansion of the National E-Procurement System and strengthening its connection with the Government Financial Management Information System.
  - Further strengthening in fiscal risk analysis, cash management, public investment management, and macro-fiscal analysis.
  - Assurance that all capital projects in the 2025 budget were approved in line with the recently adopted project management circular (met Structural Benchmark for September 2024).
  - Ministry of Finance’s Macro-Fiscal Unit prepared the 2024 Fiscal Risk Statement, expanding coverage of contingent liabilities of the State-Owned Enterprise (SOE) sector.
  - Government will develop and adopt an SOE ownership policy by the Spring of 2026 (new Structural Benchmark for March 2026).

### Electricity and water sector reforms
- Electricity sector:
  - Authorities committed to reducing NEPCO's losses and improving efficiency based on Phase 1 of the 2023–30 Government Program for Electricity Sector Efficiency, Supply Reliability, and Financial Sustainability.
  - Progress and measures:
    - Expanding roll out of time-of-use tariffs.
    - Amended the Renewable Energy Law to introduce an economically efficient tariff structure for access to, usage of, and sale of electricity to the power grid.
    - Continued review of distribution companies’ licenses to achieve higher bulk supply tariffs charged by NEPCO.
    - Introduced a legally and regulatorily permissible levy on electricity generation companies.
    - Making steady progress in clearing a large part of NEPCO’s arrears (met end-June and end-September 2024 indicative targets).
  - Network reliability high; energy sources for generation more diversified.
- Water sector:
  - Finances improved since Cabinet adopted the Financial Sustainability Roadmap for the water sector in November 2022.
  - Supported by a Memorandum of Understanding signed with the United States.
  - Targets and timelines:
    - Steps to achieve full cost recovery for operations and maintenance of water and wastewater services by 2030.
    - Aim to recover capital costs of build-operate-and-transfer projects by 2040.
  - Progress in reducing non-revenue water and water sector arrears.
  - Ongoing efforts to ensure sufficient and reliable water supply, including the Aqaba Amman Conveyance project to pump desalinated seawater to Amman.

### Technical assistance and capacity development (2013–October 2024)
- Wide-ranging IMF capacity development activities across fiscal, monetary and financial, economic modeling, legal, and statistical areas.
- Fiscal area highlights (selected entries):
  - January 2013: Public financial management.
  - May 2013: Tax administration reform agenda.
  - February 2014: VAT compliance and refund management.
  - June 2021: Debt portfolio cost and risk management.
  - October 2024: GFS - Expand GFS coverage to the general government.
- Monetary and financial highlights (selected entries):
  - January 2013: Implementation of Basel III and enhancing supervisory practices.
  - April 2021: Forecasting framework for currency in circulation.
  - July 2023: Developing Supervisory Review Process (SRP) risk rating methodology.
  - July 2023: Crypto asset regulatory framework.
  - September 2024: Developing SRP risk rating methodology.
- Economic modeling highlights:
  - February/March 2022: Forecasting and policy analysis system (FPAS).
  - June 2024: DSGE.
  - October 2024: FPAS.
- Legal and AML/CFT:
  - February 2015: AML/CFT scoping mission.
  - June 2021 and September 2021: AML/CFT TTF III ICRG issues.
- Statistical highlights (selected entries):
  - January 2013: Price statistics.
  - May 2013 and November 2013: National accounts.
  - June 2018: Monetary and financial statistics.
  - July 2024: BOP/IIP.
  - October 2024: GDP - Use of administrative data in ANA and QNA; Residential property price index - 3.

### Relations with other international institutions and IMF presence
- Relations with other institutions (URLs provided in source).
- Resident Representative: Mr. Yahia Said is the regional IMF Resident Representative for Jordan, based in Amman.
- Financial Sector Assessment Program (FSAP): Assessment conducted in 2023; report presented to the Executive Board in April (Country Report No. 2023/140).
- Documents and standards or codes assessed (selected dates):
  - Data module: 10/08/2002; Update to data module: 01/30/2004.
  - Fiscal transparency module: 01/09/2006.
  - FSSA: 01/07/2004.

*Source: Jordan—Staff Report for the 2024 Article IV Consultation, Second Review under the Extended Arrangement under the Extended Fund Facility, and Request for Modification of Performance Criteria—Informational Annex (as of October 31, 2024).*

### 11.      Despite the increasingly challenging environment, the Central bank of Jordan (CBJ)

### 11–18: Central Bank, Financial Sector, Structural Policies, and Conclusion

### Monetary policy and exchange rate framework
- The Central bank of Jordan (CBJ) has "successfully maintained monetary stability, safeguarding the peg with the U.S. dollar and strengthening its reserves position."
- Monetary policy will continue to be underpinned by the CBJ’s firm commitment to the exchange rate peg to the U.S. dollar.
- The peg “has served Jordan’s economy well by providing a credible nominal anchor of monetary and financial stability and enhancing confidence in the dinar.”
- Deposit dollarization is at "18 percent", described as the lowest deposit dollarization rate since "2017".
- The CBJ will continue to align its policy rates with those of the U.S. Federal Reserve and will remain vigilant to changes in global financial conditions.
- To improve monetary transmission, authorities plan to develop a secondary market for local government debt, starting with "an assessment of the building blocks for an active local currency bond market."

### Banking sector health and stress testing
- The banking sector is characterized as remaining healthy, with "strong capitalization and stable and low non-performing loans."
- Latest stress test results indicated that the banking system, both "at the consolidated and branches’ levels, was able to withstand shocks, even under the most severe scenario."

### Strengthening financial sector resilience (CBJ reforms and actions)
- Progress has been made in implementing the recommendations of the "2023 joint IMF-World Bank Financial System Stability Assessment."
- The CBJ aligned its prudential requirements on asset classification with "Basel Core Principles."
- Institutional enhancements:
  - The multi-agency crisis management committee has been established and is operational.
  - The CBJ has strengthened the role of the Financial Stability Committee.
  - The CBJ has collected and will continue to collect additional data for more comprehensive and thorough financial stability analyses.
- Planned further measures to strengthen resilience (noted as Structural Benchmarks under the EFF):
  - Introduce Pillar 2 risk assessment methodologies to make capital assessments more sensitive to individual banks’ risk profiles.
  - Align prudential requirements for concentration risk and related party exposure with "Basel Core Principles."
  - Design and operationalize procedures for the compensation of depositors together with the "Jordan Deposit Insurance Corporation."

### Access to finance for micro, small and medium-sized enterprises (MSMEs)
- Efforts to improve access to finance for MSMEs are ongoing, given these firms’ key role in creating jobs.
- Authorities are conducting a comprehensive review of development finance initiatives to rationalize the number of initiatives and strengthen their governance.
- Corporate credit reports have been made easily accessible to companies through digital channels to facilitate access to information and speed up transactions.
- Authorities will continue to enhance data collection by the Credit Bureau.

### Structural policies to promote jobs and growth
- Authorities remain committed to a robust structural reform agenda to promote job creation, enhance the business environment, and strengthen governance, aligned with the Economic Modernization Vision.
- Key growth-strategy reforms include (several marked as Structural Benchmarks under the EFF):
  - Amending the competition law to strengthen the authority of the Competition Department.
  - Reducing the costs of registering and closing businesses.
  - Abolishing licensing requirements for libraries, as well as cultural and sport activities, and streamlining licensing requirements for several sectors.
  - Easing restrictions and regulations in the transport and fuel sectors.
  - Digitalizing government services.
  - Further relaxing restrictions on foreign ownership.

### Labor market reforms and participation, especially for women and youth
- Ongoing efforts to reduce unemployment and promote labor force participation include (several are Structural Benchmarks under the EFF):
  - Amending the Labor Law to increase labor market flexibility and further improve childcare provisions.
  - Amending the Social Security Law mainly to harmonize benefit rights for males and females in an actuarily neutral way and facilitate flexible work arrangements.
  - Harmonizing public sector pay scales for men and women.
  - Improving public transport services, particularly to make them female-friendly.

### Conclusion and request to Executive Directors
- The Jordanian authorities value their strong partnership with the Fund, which has provided policy advice, financial support, capacity development, and a foundation for reform momentum.
- Considering Jordan’s strong performance under the EFF-supported program and the authorities’ commitment to the program’s objectives, the staff would "appreciate the Executive Directors’ support for the completion of the second review under the EFF."

*Source: IMF staff text (paragraphs 11–18 of the provided chapter).*

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_Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1jorea2024003-print-pdf.pdf_