## IMF Executive Board Approves US$1.3 billion Extended Arrangement Under the Extended Fund Facility for Jordan

_IMF News, March 26, 2020_

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## Bibliographic details
- Published: March 26, 2020

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### Program approval and purpose
- The IMF approved a four-year US$1.3 billion Extended Fund Facility (EFF) arrangement for Jordan to support the country’s economic and financial reform program and provide for spending to contain and treat COVID-19.
- The arrangement is described elsewhere in the text as a 48-month arrangement.
- Program objectives: support stronger and more inclusive growth, create jobs—especially for women and young people—and reduce poverty; improve the fiscal situation to stabilize and bring public debt towards more sustainable levels.

### Financial terms and disbursement
- Amount equivalent to SDR 926.37 million (about US$ 1.3 billion or 270 percent of Jordan’s quota).
- An amount equivalent to SDR 102.93 million (about US$139.23 million) is available for immediate disbursement; the remaining amount will be phased out over the duration of the Fund-supported program, subject to eight program reviews.

### COVID-19 response and program flexibility
- The program includes provisions for increased spending to contain and treat COVID-19.
- Although understandings were reached before the COVID-19 outbreak reached Jordan, the program was designed to support spending to contain and treat the virus; if needed, it may be adapted further to the changed circumstances to ensure sufficient support for the people.
- “If the impact of the outbreak is deep enough to put at risk program objectives, the program will be adapted further to the changed circumstances, upon reaching understandings with the authorities.”

### Donor support
- Continued support from donors, particularly through concessional loans and budget grants, will be critical to help Jordan cope with humanitarian and economic needs and to support program objectives.
- “Donor support through budget grants and concessional financing will be critical to help Jordan cope with the effects of the COVID-19 outbreak and the Syrian refugee crisis and to support program objectives.”

### Policy priorities and structural reforms
- Program anchored by critical structural reforms designed to lower electricity costs for businesses and create incentives for them to hire more young people.
- Key structural measures include:
  - reducing high electricity costs faced by businesses to enhance competitiveness and support job creation, while directing electricity subsidies only to those who need them most;
  - a temporary reduction in social security contributions, among other labor market reforms, to promote greater employment opportunities, particularly for women and young people;
  - swift implementation of the authorities’ five-year matrix, launched in the 2019 London Initiative, to improve the business climate, boost competitiveness, and attract foreign investment.
- Governance reforms to strengthen public-sector transparency and accountability.
- Fiscal strategy measures:
  - broadening the tax base and reducing tax exemptions for businesses, particularly through an overhaul of the investment incentives framework and revamping of tax and customs administrations;
  - rationalizing current expenditures while protecting critical social, health and education spending;
  - contain losses and contingent liabilities in the energy and water sectors;
  - improve the targeting of Jordan’s social safety net.
- Monetary and financial sector priorities:
  - monetary policy to remain focused on supporting the peg by maintaining an adequate reserve buffer while also considering domestic economic conditions;
  - continue strengthening the legislative and regulatory framework for Jordan’s banking and financial sectors, including further enhancing the Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) regime.

### Fiscal consolidation and debt
- Continued fiscal consolidation efforts are needed to bring public debt toward more sustainable levels.
- The government’s strategy should focus on broadening the tax base and reducing business tax exemptions through an overhaul of the investment incentives framework and revamping tax and customs administrations.
- “Continued fiscal consolidation efforts are needed to bring public debt toward more sustainable levels.”

### Recent economic developments and challenges
- Jordan has made progress in reforming its economy, but pressing challenges remain.
- External and social pressures: ongoing COVID-19 outbreak, regional conflicts, and the hosting of Syrian refugees weigh on social conditions, public finances, investment, and the external accounts.
- Macroeconomic and financial indicators cited:
  - growth has remained weak (about 2 percent);
  - unemployment high (at 19 percent of the labor force), especially for youth and women;
  - external imbalances have improved markedly;
  - reserve buffers have remained adequate;
  - the financial system is sound;
  - fiscal consolidation proved difficult to maintain and public debt remained elevated.
- Program builds on the Jordan Economic Growth Plan 2018–22 and is anchored by the five-year reform matrix launched at the 2019 London Initiative.

### Governance and business climate
- An ambitious structural agenda should be implemented to improve the business environment, enhance competitiveness and support growth.
- Specific recommendations include:
  - reduce high electricity costs faced by businesses;
  - implement measures to create jobs, particularly for women and young people;
  - simplify procedures to attract foreign investment;
  - implement governance reforms to strengthen public-sector transparency and accountability.

*Source: IMF press release, March 26, 2020.*

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## References

- [Mitsuhiro Furusawa](http://www.imf.org/external/np/omd/bios/mf.htm)
- [Jordan and the IMF](http://www.imf.org/external/country/JOR/index.htm)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2020/03/25/pr20107-jordan-imf-executive-board-approves-us-1-3-bn-extended-arrangement-under-the-eff_