Jordan’s Fiscal Ownership

Source details

Author: MOHAMAD AL-ISSISS.
Publication: F&D Magazine, September 2023.
Theme: Reflection by Jordan’s finance minister on designing and owning a homegrown, preventive, and progressive fiscal program amid multiple shocks.

Joined Ministry of Finance in November 2019.
Budget passed and new EFF program in place by March 2020.
Jordan confronted three consecutive “black swans”: COVID-19, the Russia-Ukraine crisis, and global stagflation.
April 2023 Eurobond issuance was six times oversubscribed.
Achieved EFF program targets ahead of schedule, in June 2023.

Historical regional shocks amounted to 44 percent of our GDP and drove up deficits and debt.
Syrian refugees comprised 20 percent of our population essentially overnight, producing significant fiscal impact.
Strategy emphasis:
- Widen the tax base rather than raise marginal tax rates.
- Instill discipline over the primary deficit without sacrificing safety nets or growth.
- Prioritize evidence-based, country-tailored reforms over packaged prognoses.
Revenue-side measures:
- Fight tax evasion and avoidance instead of raising marginal rates.
- Cut sales tax rates on essential goods in the 2020 budget.
- Lowered and unified customs tariffs in 2022.
- Closed tax loopholes via legislative changes such as transfer pricing.
- Unified the tax administration throughout the country; cracked down on tax evasion; unified rates to limit arbitrage across multiple categories.
Expenditure-side measures:
- Sharpened targeting while expanding safety nets.
- Attempted to pay back arrears.
- Boosted capital expenditure for the first time in years.
Program design features:
- Built-in COVID adjustor and other adaptive features in the IMF program.

Domestic revenue rose 9.1 percent year over year in the first quarter of 2023, driven mainly by taxes on income and profits.
Jordan met its income tax target for 2022 by August 2022.
Fiscal discipline in 2022 yielded a primary deficit that outperformed the IMF program target, thanks to higher-than-expected domestic revenues.

Rising global interest rates mean gains on income tax revenue are being absorbed by rising cost of servicing debt instead of improving public services.
Surviving in the global financial system is not the same as thriving; Jordan still faces many ongoing challenges.
The international community’s shifting attention can produce a financial penalty for Jordan for providing a global public good (example: hosting Syrian refugees).

IMF should add preventive tools to its roster to mobilize resources preemptively rather than reactively.
- Example: Jordan invested in better wheat storage facilities and reserve buffers at the onset of the pandemic, helping avert some repercussions of the Russia-Ukraine war.
- IMF programs should systematically embed adjustors for unforeseen expenditures (e.g., pandemic-related).
International financial institutions should provide buffers against globalization’s challenges and help mobilize resources in a way that balances need and availability.
Governments should proactively ensure the middle class has better, more affordable buffers (e.g., address rising home mortgages) before crises lead to widespread defaults.
International financial institutions must serve as apolitical institutional memory, persistently reminding the global community of unresolved challenges (example: continued support for Syrian refugees in Jordan).

MOHAMAD AL-ISSISS, F&D Magazine, September 2023

Jordan’s Fiscal Ownership
- Jordan’s Fiscal Ownership (Markdown version)
- Jordan’s Fiscal Ownership (PDF)