IMF Mission Reaches Staff-Level Agreement on Completion of Second Review Under the Stand-By Arrangement with JordanPress Release No. 13/402
October 12, 2013
An International Monetary Fund (IMF) mission visited Amman during September 4–12, 2013 for discussions on the second review of the economic program supported by a Stand-By Arrangement (SBA), and continued discussions with the authorities in the context of the IMF-World Bank Annual Meetings. The 36-month SBA in the amount of SDR 1.364 billion (about US$2 billion, or 800 percent of Jordan’s quota at the IMF) was approved by the Executive Board on August 3, 2012 (see Press Release No. 12/288). The first review under the SBA was approved by the Board on April 10, 2013, bringing total disbursements to SDR 512 million–about US$774 million (see Press Release No. 13/70).
Ms. Kristina Kostial, IMF Mission Chief for Jordan, issued the following statement today:
“We welcome the authorities’ strong commitment to implementing their national program despite an increasingly difficult external environment, including the tragic situation in Syria. We have reached a staff-level agreement on the second review under the SBA. Conclusion of the review by the Executive Board would make available to Jordan the third tranche in the amount of SDR 170.5 million (about US$258 million). The Executive Board could consider Jordan’s request for completion of the second review under the SBA as early as the beginning of November.
“Jordan’s economy performed well during the first half of 2013. Real GDP growth registered 2.8 percent year-on-year through June, with trade, finance and insurance, and a recovery in construction being the key growth drivers. Consumer price inflation eased to 5.0 percent year-on-year in August. Largely reflecting lower energy imports, the current account deficit narrowed in the first half of the year.
“The authorities have been implementing strong macroeconomic policies to reduce external and fiscal imbalances. Following the successful management of pressures on international reserves in late 2012, the central bank rebuilt reserves, which are now at comfortable levels, and well above what was programmed. The central government performance through June has been in line with expectations, and with gas flows from Egypt in the first half of the year higher than programmed, the electricity company’s losses were lower than expected.
“Looking into the remainder of 2013 and 2014, the outlook is good. GDP growth is forecast at 3-3.5 percent in 2013–14, supported by higher spending on infrastructure projects financed by grants from the Gulf Cooperation Council, continued improvements in the construction sector, higher consumption, and solid tourism seasons. Consumer price inflation is expected to continue its decline this year and next, aided in part by an expected moderation in international food prices. At the same time, the external current account deficit (including grants) is forecast to narrow substantially to 11-13 percent of GDP in 2013 and 2014, helped by lower energy imports and continued prudent macroeconomic policies.
“The authorities have committed to pursuing their program of reforms to keep the fiscal and external balances on a sustainable path while fostering growth and lowering unemployment. Most importantly, fiscal consolidation will continue to be gradual so as to not jeopardize growth prospects and will ensure adequate social protection. For 2013, the program is expected to be broadly on track, and central bank reserves are foreseen to be further bolstered, aided by improved confidence and continued de-dollarization. The electricity company’s losses, though, are projected to be higher than expected because a temporary suspension of gas imports from Egypt required more expensive fuel imports. For 2014, the envisaged fiscal measures include better targeting of fuel and food subsidies. Moreover, completing the government’s income tax reform initiative not only would generate sizable revenues that could be put to productive use for all Jordanians, but also would foster equity, a key pillar of the program.
“The authorities will also sustain the implementation of their medium-term energy strategy to diversify Jordan’s energy sources and return the electricity company to cost recovery while targeting electricity subsidies to those in need. Indeed, poor and middle-class households will be exempted from the gradual tariff increases set to take effect at the beginning of each of the next years. Another important element of the program is structural reform to reduce unemployment and increase growth. In this regard, the authorities have recently launched Jordan Job Compact initiative designed to help youths find jobs. Work is also ongoing on enhancing access to finance and on a new investment law, which could significantly enhance the transparency of the rules governing investments.
“The team would like to thank the authorities for constructive discussions and for their hospitality.”