IMF official places public debt management at forefront of challenges facing Jordan

AMMAN — Managing public debt tops the challenges facing Jordan, International Monetary Fund (IMF) Mission chief to Jordan Kristina Kostial said Tuesday.

In a press conference from Washington over the phone, Kostial expected Jordan’s indebtedness to reach 89 per cent of the gross domestic product (GDP) by the end of this year, noting that the percentage was 71 per cent of the GDP in 2011.

To face this challenge, Kostial said the authorities have to control public finances, especially those related to the central government and service units such as the National Electric Power Company which started implementing a strategy towards full recovery.

According to the mission chief, the Kingdom has shown the capability to overcome economic problems in a difficult environment, especially with the cuts of Egyptian gas supplies and the Syrian and Iraqi crises. 

Besides the substantial indebtedness and the considerable budget deficit of the central government and state units, Kostial stressed the need for structural reforms, particularly those to tackle chronic high levels of unemployment, especially among the youth and women. 

She mentioned the low level of economic participation for the workforce, especially women, when compared to  peers in the Middle East and North Africa countries.

The mission chief valued recent improvements with the endorsement of the Public-Private Partnership Law and the Investment Law as well as the improvement in public sector institutionalisation  and governance.  

Due to the difficult situation facing the Kingdom, she said that the IMF’s executive board has adopted a flexible policy with Jordan in order to arrive at better conditions. 

Kostial expected electricity tariffs to be raised at the beginning of next year, urging the government to make revenue amendments because the GDP lost about 9 per cent between 2007 and 2011 due to lower revenues.

She described the draft income tax law, under discussion in Parliament, as a “step in the right direction” and, noted that the draft law can be more ambitious in achieving justice.

“Three per cent of the population pay income tax and this rate must be widened to reach 20 per cent of the rich and not the middle class,” she said. “That is justice.” 

Kostial called for limiting tax incentives and for it to be more transparent, noting the IMF preferred to work on measures for additional revenues during discussions with government officials, leaving the management for spending to the authorities.   

Regarding extending the fund’s programme with the Kingdom, she said that it will end in August 2015, and it is the government’s decision to ask for a renewing the programme.

Asked about alternatives in case the income tax law is not endorsed this year, she said that tax incentives, which doubled in the last years, should be reduced.