Washington, DC:
An International Monetary Fund (IMF) team led by S. Ali Abbas, concluded
virtual discussions with the Jordanian authorities and reached a
staff-level agreement on the second review of the authorities’ economic
reform program supported by the Extended Fund Facility (EFF) arrangement.
This agreement is subject to approval of the IMF’s Executive Board.
At the conclusion of the discussions, Mr. Abbas issued the following
statement:
“The COVID-19 pandemic continues to pose significant challenges for Jordan.
Output contraction in 2020 is estimated to have been limited at 2 percent,
including due to the authorities’ timely and effective fiscal and monetary
support. However, successive COVID waves since October have sharply hit
businesses and households, with unemployment rising to a record high of
24.7 percent in Q4 2020.
“2021 is expected to see a recovery of 2 percent, with nominal GDP expected
to expand by 3.6 percent. This projection incorporates the likely
implications of a slower-than-anticipated rollout of the vaccination
globally and the attendant delay in the return of tourism to pre-pandemic
levels, as well as stronger external demand conditions, and continued
domestic policy support.
“The immediate policy priority is to deal with the ongoing serious pandemic
wave and mitigate its human and economic impact. To this end, fiscal
targets for 2021 aim to accommodate higher social spending, including on
job retention in affected sectors and youth programs; and a credit support
scheme targeted at small and medium enterprises (SMEs) – which account for
the bulk of employment – has been expanded.
“Fiscal policy thus far has ensured the preservation of macroeconomic
stability and sought to cushion the impact of the crisis on growth. Going
forward, the fiscal strategy remains anchored in equitable tax reforms,
aimed at tackling evasion, closing loopholes, and broadening the tax base.
Recent months have seen major legislative reforms in this area. Robust
implementation of these reforms, including through continued tax
administration reforms and modernization, should help raise significant
revenue over the medium-term. At the same time, the authorities aim to
enhance the efficiency of public spending; fully implement the new
public-private partnerships (PPP) law to ensure effective selection and
execution of viable projects in line with national priorities, and closely
monitor contingent liabilities. These actions will strengthen debt
sustainability.
“Monetary policy has been appropriately accommodative with a sizable and
timely stimulus supporting credit to the economy and jobs. Moving forward,
policy needs to remain flexible and data driven, balancing the need to
entrench the recovery and maintain monetary and financial stability.
International reserves are projected to remain comfortable over the medium
term. The banking system remains well-capitalized and liquid, and while
non-performing loans have risen slightly last year they remain at low
levels. However, continued vigilance on asset quality is warranted given
the strains on the buffers of corporates and households due to the
pandemic.
“Steady progress on structural reforms remains critical, notably in the
electricity sector, where efforts are ongoing to reduce production costs
and lower high tariffs on businesses which impede growth, while continuing
to effectively protect lower-income households. Reforms aimed at supporting
female labor force participation, more flexible labor markets, and reducing
the costs of doing business, remain key to boosting competitiveness and
inclusive growth. At the same time, continued progress on governance
reforms is important to strengthening public trust; the authorities’
transparent reporting of the details of their COVID-related spending thus
far has been a welcome step in this regard.
“Robust concessional support from donors, including through provision of
vaccines, remains crucial, especially given the longer tail of the
pandemic. Jordan continues to bear a disproportionate burden in supporting
and hosting 1.3 million Syrian refugees, including providing all residents
equal access to vaccination. In view of the higher financing needs, staff
supports the authorities’ request for an augmentation of access under the
EFF by US$200 million. Total IMF disbursements, including the amount drawn
under the Rapid Financing Instrument, over 2020-24 are expected to amount
to SDR 1,362.11 million (or around US$1.95 billion).
“The mission would like to thank our counterparts for a constructive and
fruitful dialogue. A wide-ranging set of meetings was held with the Prime
Minister, the Minister of Finance, the Governor of the Central bank, other
senior cabinet ministers and officials, parliamentarians, donors, and
representatives from the private sector and civil society.”
