IMF Executive Board Concludes First Review Under Jordan’s Extended Fund Facility Arrangement and Rephases Access to Address the Impact of COVID-19
IMF News, December 15, 2020
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- Published: December 15, 2020
Program and review outcome
- The Executive Board completed the first review of Jordan’s performance under the program supported by the Extended Fund Facility (EFF).
- Jordan’s four-year EFF is SDR 926.37 million (about US$1.3 billion, equivalent to 270 percent of Jordan’s quota in the IMF).
- The EFF was approved by the IMF’s Board on March 25, 2020 (see Press Release No. 20/107).
- The Executive Board approved waivers of non-observance on the performance criteria on the central government primary deficit and the combined public deficit (both excluding grants).
- The Board approved modification of targets going forward and rephasing of structural conditionality.
- The Board approved the authorities’ request to rephase access under Jordan’s EFF by bringing forward about US$150 million in Fund disbursements into 2021–22 to support near-term financing needs emerging in the aftermath of COVID-19.
Disbursements and financial support
- The completion of the review will make SDR 102.93 million (about US$148 million) immediately available.
- This brings total IMF disbursements to Jordan in 2020 to SDR 497.41 million (around US$689 million).
- This total includes an SDR 291.55 million (about US$401 million) purchase in May under the Rapid Financing Instrument.
Economic impact of COVID-19 and program flexibility
- COVID-19 has taken a toll on the economy with unemployment rising to record high and fiscal and external deficits widening.
- The IMF enhanced built-in flexibility in the program to accommodate spending needed to prevent, detect, control, treat, and contain the spread of COVID-19, as well as additional social protection spending.
- The Fund’s financial support is intended to help Jordan meet these challenges and catalyze support from other development partners.
- The IMF encourages donors to step up their support, preferably in the form of grants, to help Jordan cope with the impact of the pandemic on the Jordanian people and some 1.3 million Syrian refugees.
Near-term policy orientation (as stated by Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair)
- The authorities have responded with timely and targeted measures to protect lives and livelihoods, while also preserving debt sustainability and market access.
- Authorities remain committed to gradually rebuilding policy buffers and arresting the rise in public debt; preserving the credibility of the peg; accelerating electricity sector reforms; and enhancing labor market, business climate, and governance reforms to promote higher and more inclusive growth.
- In the near term, fiscal policy continues to focus on supporting the economy, with enhanced flexibility in the program to accommodate unanticipated spending related to the pandemic, as well as additional social protection spending.
- High quality fiscal measures should underpin a gradual fiscal consolidation as the recovery takes hold.
- Authorities’ strategy should focus on:
- broadening the tax base through both tax policy and tax administration reforms;
- eliminating pressures from public utilities and public-private partnerships;
- improving the fairness, efficiency, and transparency of public finances.
- Monetary policy should remain supportive given the still-fragile economy, while safeguarding the peg.
- The financial system is sound, but continued efforts will be needed to preserve its stability and promote financial inclusion.
- The Financial Sector Assessment Program update in 2022 will provide a timely and comprehensive diagnostic and help lay out a roadmap for medium-term financial sector reforms.
- Sustained efforts are needed to achieve durable, inclusive, and jobs-rich growth, with reforms to improve the business climate, reduce unemployment particularly among women and youth, enhance competitiveness, and strengthen governance.
- Noted governance steps: in-train amendments to the illicit gains law, publication of details of COVID-related spending, and initiation of a review of the most significant power purchase agreement.
Risks and mitigation
- The COVID-19 outbreak continues to pose significant risks to program implementation.
- These risks are mitigated by the authorities’ strong commitment to the program and stepped up financial support from development partners, especially in the form of grants.
Press Release No. 20/375 — IMF Communications Department, December 14, 2020.