An International Monetary Fund (IMF) mission, led by Mr. Chris Jarvis,
visited Amman from November 11–20 to conduct the 2019 Article IV
Consultation, and review progress under Jordan’s extended arrangement under
the Extended Fund Facility (EFF).
At the end of the mission, Mr. Jarvis issued the following statement:
“The mission had productive discussions with the Jordanian authorities.
They covered recent economic developments, the economic outlook, and risks
to the economy. We agreed that the priorities for the coming years are to
maintain economic stability, boost growth, create jobs and strengthen
social protection. As these cannot be achieved fully in the space of the
few remaining months of the current IMF-supported program, discussions
began on a new three-year program that could be supported by the IMF.
During this mission, we made good progress toward agreement on the broad
objectives of such a program. In the period ahead we aim to complete these
discussions and to agree on the specific policies needed. To this end, we
expect to return to Amman in late January to continue discussions.
“The Jordanian government emphasized its commitment and determination to
continue the reform process and to overcome current obstacles to growth.
The authorities have made important progress in maintaining economic and
financial stability in recent years. Inflation is low, the balance of
payments has improved, and international reserves have recently rebounded.
Moreover, the financial system remains stable and the authorities have
taken important steps to improve the business climate, placing Jordan as
one of the world’s top three improvers, according to the World Bank’s Doing
Business Indicators.
“Monetary and exchange-rate policies remain appropriate, and foreign
reserves are comfortable. The authorities should continue to adjust
interest rates as needed to maintain continued stability and confidence in
the currency.
“Still, challenges remain. Real GDP growth has averaged only 2-2.5 percent
since 2010, and unemployment remains particularly high for youth and women.
Also, fiscal consolidation has been slower than envisaged. Yields from
efforts to broaden the tax base and mobilize revenues to support Jordan’s
fiscal and development needs have fallen short of expectations, and weaker
revenues have in turn led the authorities to cut back on public investment.
Slippages in 2019 were especially pronounced, and public debt remains very
high. In this regard, fiscal space will be limited, suggesting that further
international assistance will be critical in allowing for continued
growth-enhancing reform.
“Going forward, it will be important to continue efforts to reduce
vulnerabilities, increase economic resilience, and support stronger growth.
To achieve this, we recommend a combination of deep structural reforms with
steady and gradual fiscal consolidation that credibly places public debt on
a downward path over the medium term, while also improving social
protection measures
“The fiscal strategy should be supported by continued efforts to strengthen
tax and customs administration, as well as measures to enhance public
financial management, fiscal transparency, and governance.
“Electricity-sector reforms are vital. The energy-sector roadmap is an
essential first step in placing NEPCO’s finances on a firmer footing; but
should be complemented by further efforts to eliminate losses, while also
reducing tariffs for commercial consumers, which are undermining the
competitiveness of Jordan’s businesses.
“We encourage the authorities to continue to enhance broader private-sector
growth. With the assistance of the World Bank and other partners, the
authorities have outlined a concrete matrix of reforms that should, if
implemented swiftly, go a long way towards improving the business climate
and boosting competitiveness. In addition, pro-employment reforms will be
critical for inclusive growth and stability. Recent amendments to the
social security law are welcome. On the new package of employment-based
cash incentives, which are designed to boost job creation and growth, it is
important that such measures be implemented transparently, and that they
take into account Jordan’s pressing fiscal constraints. Measures to support
financial-sector development are also key in supporting inclusive growth,
and continued implementation of the authorities’ financial inclusion
strategy will help broaden financial access, especially for women, the
poor, and small and medium enterprises (SMEs).
“Jordan can continue to maintain economic stability and enhance growth with
a well-crafted and credible strategy, and with support from the
international community. The Fund remains committed to continue to support
the authorities as they work to deliver stronger and more sustainable
growth, reduce fiscal imbalances, strengthen the business environment,
increase transparency, improve living standards, and ensure that Jordan’s
most vulnerable people are protected.
“Our visit provided an opportunity to meet with a broad range of
counterparts, including Prime Minister Omar Razazz, Minister of Finance
Mohamad Al-Ississ, Governor Ziad Fariz, other cabinet ministers, members of
Parliament, and representatives from the private sector, civil society, and
the international community. We are grateful for a most constructive and
candid set of talks, and for the authorities’ continued cooperation and
warm hospitality.”
