## Jordan’s Fiscal Ownership

## Source details

**Canonical URL:** [Jordan’s Fiscal Ownership](https://www.imf.org/en/publications/fandd/issues/2023/09/pov-jordan-fiscal-ownership-mohamad-al-ississ)

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## Bibliographic details
- Authors: MOHAMAD AL-ISSISS
- Published: September 1, 2023

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### Overview
- 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.

### Context and sequence of events
- 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.

### Diagnostic findings and fiscal strategy
- 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.

### Measurable outcomes and key statistics
- 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.

### Ongoing challenges and fiscal risks
- 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).

### Policy recommendations and prescriptions for international financial institutions
- 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*

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## Content in this bundle

- **Jordan’s Fiscal Ownership**
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_Source: https://www.imf.org/en/publications/fandd/issues/2023/09/pov-jordan-fiscal-ownership-mohamad-al-ississ_