Jordan

The Jordanian authorities, in partnership with the IMF, have designed a program that will support spending to contain and treat COVID-19. The 48-month Extended Fund Facility (EFF) program for an amount equivalent to SDR 926.37 million (about US$ 1.3 billion) primarily aims to spur growth by emphasizing structural reforms—policies that transform the foundation of the economy.

To help the people of Jordan effectively manage COVID-19, the program now supports the necessary spending for medical supplies and equipment and for containment of the outbreak. If the economic impact of the outbreak is deep enough to put at risk the program objectives, the program will be adapted further to the changed circumstances.

The structural reforms program addresses two significant areas:

Support growth and tackle unemployment—especially among youth and women: The government and the Fund believe that the most effective measure Jordan can undertake at this stage is to remove the impediments to growth and incentivize businesses to hire more people. That means reducing the cost of starting and operating a business – specifically: (a). reducing the high cost of electricity, while directing electricity subsidies only to those who need them most; and (b). temporarily reducing the cost of social security contributions for start-ups hiring young people as new entrants.

The program will also energize pro-employment reforms aimed at women by removing barriers to their participation in the labor force. Much of this effort is already underway or planned, for instance: (a). cash support for nurseries in areas with low female labor force participation; (b). developing a public transportation system that is safe and affordable to make it easier for women to travel to work; (c). amending key by-laws that previously restricted working hours for women; (d). removing references to gender that can be used to discriminate against women in Ministry of Labor instructions; and (e). mandating firms with more than 20 parent employees (men or women) provide daycare for children under five.

Improving the fiscal situation – Given the continued need for high deficits and debt—and the need to increase investments to jumpstart growth—the government and the IMF believe that decisive actions are needed to mobilize additional revenues. As such, the new program focuses on: (a). improving tax and customs administration and cracking down on tax evasion to improve tax collections; (b). rationalizing tax exemptions currently received by businesses through an overhaul of the investment incentives framework.

In addition, the new program also includes significant technical assistance and training provided by the Fund, which will help Jordan strengthen economic institutions and effectively implement policies. Continued support from donors, particularly in concessional financing and grants, will be critical to program success and help Jordan cope with the humanitarian needs arising from regional conflicts and the Syrian refugee crisis.

The Jordanian economy has been in a low-growth environment for some time – it needs a boost that can serve as the engine for job creation and begin the improve the lives of the people. The government and the Fund believe that the structural reforms as outlined in the new program can provide that impetus and begin to transform the economy, leaving the economy better prepared to manage and recover from the COVID-19 outbreak.