IMF Executive Board Completes Second Review Under the Extended Fund Facility for Jordan

IMF News, May 6, 2019

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Canonical URL: IMF Executive Board Completes Second Review Under the Extended Fund Facility for Jordan

The Executive Board completed the second review of Jordan’s economic performance under the Extended Arrangement under the Extended Fund Facility (EFF).
Completion of the second review enables the disbursement of SDR 120.085 million (about US$166.4 million), bringing total disbursements under the program to SDR 223.015 million (about US$309. million).
The Executive Board approved:
- a waiver of non-observance of performance criterion on the Net International Reserves of the Central Bank of Jordan (CBJ),
- an extension of the arrangement to March 2020,
- and the rephasing of access.
Background: On August 24, 2016, the Executive Board approved a three-year extended arrangement under the EFF for Jordan for an amount equivalent to SDR 514.65 million (about US$723 million at the time of approval of the arrangement, or 150 percent of Jordan’s quota).

The authorities are commended for:
- preserving macroeconomic stability,
- maintaining a prudent monetary policy,
- ensuring a sound financial system.
Jordan faces a challenging environment: low economic growth, high unemployment, and elevated public debt.
Policy priorities identified:
- Swift implementation of policies and reforms to bring public debt on a downward path,
- Boost investment and productivity,
- Enhance inclusive growth.

The authorities should continue gradual and steady fiscal consolidation, with due regard to social protection needs.
Recent income-tax law amendments are described as encouraging and key to securing a fairer and more sustainable fiscal framework.
Required accompanying measures:
- Resolute implementation of the new law,
- Ongoing measures to enhance tax administration,
- Measures to reduce tax evasion.
These fiscal reforms are crucial to:
- preserve macroeconomic and external stability,
- place public finances on a sounder foundation,
- lessen risks to debt sustainability.
Note: A number of key fiscal reforms have been delayed, underscoring the need for resolute implementation.

Jordan’s monetary policy stance is appropriate.
Authorities should remain ready to adjust interest rates as needed to maintain an adequate reserve buffer.
Banks remain sound and well-capitalized.
Steps to improve financial sector oversight and supervision are welcomed.

Recent enacted reforms include:
- the secured-transactions law,
- the bankruptcy law,
- the business-inspections law.
Complementary reforms and measures highlighted:
- promote labor-market flexibility, particularly for youth and women,
- publication of a financial-inclusion action plan,
- measures to support credit to SMEs.
Continued implementation of these reforms is vital to set the stage for high-quality, inclusive growth.
Priority should be given to measures to reduce business costs and boost employment.

The authorities’ roadmap to restructure the energy company to reduce high electricity costs for businesses is welcome.
Specific measures under the plan to be implemented swiftly:
- elimination of large cross subsidies,
- implementation of the new tariff-adjustment mechanism.
These measures should be complemented by a well-targeted social protection scheme to safeguard low-income and vulnerable households.

The recent London Initiative is noted as timely and demonstrates the international community’s ongoing determination to support Jordan.
Continued donor assistance is key to help Jordan cope with the refugee crisis and support the authorities’ policy and reform efforts.
The IMF calls for greater donor support to help Jordan cope with the Syrian refugee crisis.

Press Release No. 19/144, May 6, 2019.