IMF Executive Board Concludes Third Review Under Jordan’s Extended Arrangement

IMF News, December 20, 2021

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The Executive Board completed the third review of Jordan’s program supported by the Extended Fund Facility (EFF) on December 20, 2021.
The completion of the review makes the equivalent of SDR 240.17 million (about US$335.2 million) immediately available.
Total IMF disbursements to Jordan since the start of 2020 have reached the equivalent of SDR 881.68 million (about US$1.230 billion), including a purchase of the equivalent of SDR 291.55 million (about US$407 million) in May 2020 under the Rapid Financing Instrument.
Jordan’s four-year extended arrangement originally amounted to the equivalent of SDR 926.37 million (about US$1.293 billion, equivalent to 270 percent of Jordan’s quota in the IMF), approved on March 25, 2020.
The arrangement was augmented on June 30, 2021 to the equivalent of SDR 1070.47 (about $1.494 billion, equivalent to 312 percent of Jordan’s quota in the IMF).

The gradual reopening of the economy in 2021, underpinned by a robust vaccination campaign and supportive policies, has helped spur a nascent recovery.
Unemployment has remained at high levels, particularly for youth and women.
Despite weak domestic demand, the current account deficit has widened due to higher international fuel prices and intermediate imports, raising gross financing requirements for 2021-22.
Jordan continues to host 1.3 million Syrian refugees, a factor noted as critical to external support needs.

Program targets for 2022 have been revised to allow adequate fiscal space to entrench the recovery, support investment, and protect jobs.
The program will continue to accommodate higher-than-expected spending related to the pandemic.
“The fiscal targets for 2022 have been amended to ensure adequate space for the extension of important social protection and job retention programs and for priority public investment, while still being consistent with bolstering public debt sustainability and rebuilding fiscal buffers.”
The monetary policy stance is judged appropriate and should remain flexible and data driven, continuing to support the peg.

The IMF’s financial support is expected to help Jordan navigate challenges and catalyze support from other development partners.
Continued strong donor support is described as critical, including to support Jordan’s hosting of 1.3 million Syrian refugees.
While the financial sector remains sound, continued vigilance is warranted given that the full effects of the pandemic may not yet be reflected in banks’ asset quality.
To further enhance the AML/CFT regime, the authorities are committed to resolving the remaining strategic deficiencies identified by the FATF.

Advancing several legislative reforms to broaden the tax base and close tax loopholes remains critical.
Continued efforts to enhance the efficiency and transparency of public finances are emphasized.
The prospects for durable and inclusive growth rest on progress in:
- increasing youth and female labor force participation,
- enhancing labor market flexibility,
- promoting competition,
- reducing the costs of doing business, and
- strengthening governance and transparency.
The authorities are preparing for the rollout of the electricity tariff reform aimed at reducing high business tariffs in a revenue-neutral manner for the electricity provider NEPCO.
The authorities are also working to mitigate the impact of climate change on water scarcity, with a caution that any projects should:
- be subject to due financial diligence,
- adhere to best practices in bidding and transparency, and
- be consistent with debt sustainability.

Downside risks: new COVID variants and significant economic slack, presenting risks of economic scarring.
Near-term priorities:
- entrench the still-nascent recovery,
- arrest high unemployment,
- protect the most vulnerable.
Continued donor support is needed to address Jordan’s external financing needs and shoulder the disproportionate burden Jordan bears in hosting refugees.

IMF Communications Department. Press Release No. 21/391. December 20, 2021.