IMF board endorses 6th review under the SBA for Jordan

AMMAN — The Executive Board of the International Monetary Fund (IMF) completed the sixth review of Jordan’s three-year economic programme supported by a Stand-By Arrangement (SBA), an IMF statement said. 

The completion of the sixth review enables the immediate release of about $200 million, bringing total disbursements under the programme to about $1.58 billion, out of about $2 billion approved by the board on August 3, 2012.  

In completing the sixth review, the IMF approved authorities’ requests to rephase the undrawn fund purchases in two disbursements over the remaining programme period, and for waivers of applicability for the end-March 2015 performance criteria on the primary fiscal deficit and the combined public deficit.

Following the board’s discussion, which took place in the last week of April, Mitsuhiro Furusawa, IMF’s deputy managing director and acting chair, said: “Jordan continues to persevere in a difficult regional environment. Conflicts in neighbouring countries and hosting refugees continue to put social and economic pressures on the economy, including on the fiscal and external accounts. Nonetheless, growth is picking up, inflation is low, the fiscal and external positions are gradually strengthening, and the banking system is sound overall.”

However, reforms must continue, according to the IMF executive, who said: “Fiscal adjustment will continue in view of the high public debt. In particular, the windfall from lower oil prices, which is expected to be temporary, will be saved to reduce debt and rebuild fiscal buffers. A prudent 2015 budget together with the adoption of the new Income Tax Law and other measures will bring about most of the adjustment in 2015.”

He noted that concerned authorities will continue to implement their energy strategy aimed at bringing the electricity company back to cost recovery by 2018. 

“Progress on new energy sources remains on track and, most importantly, the liquefied natural gas terminal is expected to start operating in mid-2015. This progress, together with the planned fiscal adjustment, should bring debt on a downward path starting in 2016.”

Furusawa highlighted the key role played by the Central Bank of Jordan.

“The central bank is appropriately focused on preserving comfortable reserve buffers while being mindful of external developments. The authorities will further strengthen financial supervision, including in the non-bank sector.”

Despite the progress made in structural reforms, the official concluded, more is needed to support growth and reduce persistently high unemployment. 

“The focus should be on broad-based labour market policies, especially to increase female labour market participation and reform public sector hiring and compensation practices. There is also scope for further improving the business climate and strengthening public institutions,” Furusawa said.