## IMF Survey : Jordan’s Economy Sees Progress Despite Series of Shocks

_IMF News, August 5, 2015_

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**Canonical URL:** [IMF Survey : Jordan’s Economy Sees Progress Despite Series of Shocks](https://www.imf.org/en/news/articles/2015/09/28/04/53/soint080515a)

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## Bibliographic details
- Published: August 5, 2015

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### External shocks and context
- Jordan was hit by a series of exogenous shocks prior to and during the program:
  - Disruption of gas supply from Egypt due to repeated sabotages of the Arab Gas Pipeline, requiring substitution with expensive fuel and producing large losses for the electricity company amounting to 5 percent of GDP in 2011.
  - The “Arab Spring” in 2011 prompted increased current spending including higher subsidies and wages, contributing to a central government fiscal deficit increase by 5 percent of GDP.
  - Combined public sector deficit (central government deficit plus losses of the electricity company) expanded by about 10 percent of GDP in one year.
  - The Syrian refugee crisis: authorities estimate there are more than one million refugees, or about 20 percent of Jordan’s population.
  - Emergence of ISIS and regional instability disrupted exports and tourism; Iraq is Jordan’s largest trading partner and the destination of some 20 percent of its exports.

### IMF program details and flexibility
- IMF Executive Board approved on July 31 the final review under the $2 billion Stand-By Arrangement agreed in 2012.
- Final disbursement of about $400 million was approved, making Jordan the first Arab country in transition to successfully complete an IMF-backed program.
- IMF showed flexibility during the program in:
  - Fiscal targets, in light of unanticipated government outlays related to refugees and gas disruptions.
  - Timing of program policies to allow authorities sufficient time to consult stakeholders and implement a medium-term energy strategy.
  - Additional grants from the international community enabled flexibility.

### Achievements of the program
- Program had three main objectives: maintaining macroeconomic stability; ensuring fairer, more equitable policies; and increasing growth prospects.
- Macroeconomic stability:
  - Gradual reduction of the combined public sector deficit by some 5.3 percent of GDP over the past three years, attributed to energy sector reform and central government measures.
  - Public debt was 71 percent of GDP at the end of 2011 (pre-program baseline).
- Equity and redistribution:
  - Abolished general subsidies on fuel pump prices and replaced them with targeted cash transfers to some 70 percent of the population (provided when the oil price is above $100 per barrel).
  - Limited reform to income taxes: less than 3 percent of the population are paying income taxes.
- Structural and business environment reforms:
  - New investment and private-public partnership laws put in place.
  - Improvements in the public investment framework and progress on improving access to finance.

### Fiscal position and financing needs
- Current public debt reported at 90 percent of GDP.
- Authorities should bring the electricity company back to cost recovery and consider further central government measures, including widening the income tax base.
- Financing needs expected to remain high for the next couple of years.
- IMF view: reforms needed to reduce debt from the current 90 percent to the authorities’ target of about 70 percent by 2020, regarded as a safe threshold for an emerging economy.
- Sustained donor support is essential given the expense of hosting Syrian refugees; international assistance remains indispensable.

### Labor market, social outcomes, and inclusiveness
- Unemployment rates:
  - 13 percent overall.
  - 20 percent for women.
  - 30 percent for the youth.
- Labor force participation and female employment:
  - Low overall workforce participation; many people are giving up seeking work.
  - Female labor force participation particularly problematic: only 10 percent of the women of working age are actually working.
- IMF assessment: creating jobs remains an area where reform has fallen short; structural unemployment persists even during periods of higher growth.
- Barriers to access to finance noted: absence of a robust law for collateral, insolvency, or bankruptcy inhibits lending.

### Growth performance and prospects
- Historical and recent growth:
  - Average growth of 6.5 percent from 2000 to 2009.
  - Growth “has hovered at about 3 percent” more recently.
  - IMF hopes Jordan can return to its medium-term target potential of 4.5 percent growth.
- Employment implications:
  - IMF calculations indicate Jordan needs a growth rate of some 6 percent just to absorb new entrants into the labor force.
- Conclusion: structural reforms are needed to raise potential growth, translate growth into higher employment, and attract prospective investors despite regional uncertainty.

### Policy recommendations and priorities
- Continue energy sector reforms and ensure the electricity company returns to cost recovery.
- Widen the income tax base to increase revenue and fiscal sustainability.
- Advance labor market reforms to raise workforce participation and reduce structural unemployment, with a focus on female participation.
- Strengthen laws and frameworks to improve access to finance: collateral, insolvency, and bankruptcy legislation.
- Improve the business environment and facilitate investment (including through private-public partnership frameworks).
- Maintain engagement with international donors to secure sustained support for refugee-related and fiscal needs.

*Source: IMF Survey, August 5, 2015.*

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [IMF Survey Interview](https://www.imf.org/en/news/search)
- [IMF Country Focus](https://www.imf.org/en/news/country-focus)
- [Press release](http://www.imf.org/external/np/sec/pr/2015/pr15366.htm)
- [Read the report](http://www.imf.org/external/pubs/cat/longres.aspx?sk=43176)
- [Jordan gets IMF loan](http://www.imf.org/external/pubs/ft/survey/so/2012/int080312a.htm)
- [Jordan and the IMF](http://www.imf.org/external/country/JOR/index.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/soint080515a_