News Brief No. 99/68

News Brief: IMF Approves 10.66 Million SDR Outlay to Jordan

October 6, 1999

IMF Approves 10.66 Million SDR Outlay to Jordan

The International Monetary Fund (IMF) approved today an SDR 10.66 million (about US$15 million) outlay to Jordan as part of the first review under the nation's three-year, SDR 127.88 million (about US$178 million) Extended Fund Facility (EFF)¹ loan, which was approved on April 16, 1999 (see Press Release No. 99/13). Total outlays amount currently to SDR 55.42 million (about US$77 million), including SDR 34.1 million (about US$47 million) from a Compensatory and Contingency Financing Facility (CCFF)² credit that was also approved with the EFF last April.

At the conclusion of the Executive Board's review of Jordan's performance under the EFF-backed program, Stanley Fischer, First Deputy Managing Director of the IMF, said: "During today's discussions, the Executive Board emphasized the following points:

"Directors expressed satisfaction that the extended arrangement was off to a good start. They welcomed the improvement in economic conditions and confidence in the course of 1999, as indicated for example by the rebound in international reserves, after a very difficult first quarter. They felt that these positive developments reflected the authorities' renewed commitment to both macroeconomic stabilization and structural reforms.

"Directors noted the authorities' commitment to the fiscal program, in which significant fiscal consolidation is expected to be achieved this year. Directors felt that continued efforts at fiscal adjustment will be needed in subsequent years to reduce the debt burden and free resources for private sector development. In support of this objective, Directors encouraged the authorities to exercise expenditure restraint and to carry through their plans for reform of the tax system, in particular the introduction of the VAT early next year, the modification of the income tax, and the reduction in external tariffs.

"Directors pointed to the flexibility shown by the Central Bank of Jordan in the management of domestic interest rates so as to maintain the exchange rate peg and low inflation, and in this connection remarked that confidence had been restored to a point where it had been possible to reduce interest rates substantially. The recent initiation of a regular series of Treasury bills auctions was seen as an important step in the development of financial markets in Jordan.

"Directors also welcomed recent structural reforms, such as the awarding of contracts to private operators in the water and railway sectors. Directors urged the authorities to continue to move forward vigorously with structural reforms, in particular with the restructuring and privatization of public enterprises.

"Directors also discussed the problems which had come to light concerning misreporting of fiscal and national accounts data in 1996-98 under the previous extended arrangement. They were very concerned both by the misreporting itself and because it had contributed to a belated policy response by the authorities and a weakening of economic performance in Jordan. However, Directors were reassured by the recent improvements in the compilation of statistics and in the monitoring of fiscal accounts; the timeliness with which they are now reported to the Fund and released to the public; and the authorities' commitment to maintaining the current open and cooperative relationship with the Fund. Directors welcomed the authorities' intention to make a voluntary early repayment of SDR 11.8 million, an amount equal to the last disbursement under the previous arrangement.

"Directors recognized the need to review the general policies for the provision of data and information by members of the Fund, and the subsequent monitoring thereof, in connection with Fund surveillance and arrangements involving use of Fund resources. The Executive Board intends to return to these broader issues shortly," Fischer said.

1 The EFF is an IMF financing facility that supports medium-term programs, which seek to overcome balance of payments difficulties stemming from macroeconomic imbalances and structural problems. The repayment terms are 10 years with a 4.5-year grace period on principal payments. Current interest charged on EFF disbursements is 4.02% annually.

2 The CCFF assists IMF members experiencing temporary shortfalls in export earnings. The loans are repayable between 3.5 and 5 years, and carry a standard annual interest charge, which is currently 4.02%. Jordan had immediate access to the full CCFF credit when it was approved on April 16.