IMF completes first Jordan review, praises performance

AMMAN — The Jordanian economy has performed favourably under a difficult external environment, as macroeconomic stability and external viability have been maintained, thanks to a prudent monetary policy and progress in reducing the fiscal deficit, an international agency said.  

However, with below-potential economic growth, high unemployment, and difficult social conditions, steadfast implementation of reforms is critical to preserve these achievements and enhance inclusive growth, said Mitsuhiro Furusawa, deputy managing director and acting chair of the International Monetary Fund (IMF).

The IMF issued the statement after the Executive Board on Wednesday completed the first review of Jordan’s economic performance under the extended arrangement under the Extended Fund Facility (EFF). 

The completion of the first review enables the disbursement of some $71 million, bringing total disbursements under the programme to about $142 million. 

“The authorities are committed to continue with a gradual and steady fiscal consolidation to bring public debt towards more sustainable levels. To help public finances rest on a sounder foundation, the removal of exemptions on the general sales tax and custom duties will continue over the programme period,” Furusawa said in the statement, posted on the IMF’s website. 

The IMF official highlighted that these reforms are being complemented by others to tackle tax evasion, rationalise expenditures, contain contingent liabilities and improve the financial condition of the energy and water sectors. 

“The Central Bank of Jordan has tightened its monetary policy stance since November 2016 and stands ready to increase the policy interest rates further to support the peg. The banking system is well capitalised and profitable.’’

The gradual adoption of Basel III, a comprehensive set of banking reform measures and performance benchmarks, and the authorities’ decision to complement it with an additional capital buffer, provide important resilience to shocks and will help preserve financial stability, Furusawa added.

Efforts to promote financial inclusion and facilitate access to credit and improve the business environment should help support investment and productivity, and enhance inclusive growth, the official said, adding that further reforms to reduce the cost of formal jobs are critical to address high unemployment, particularly for young people and women. 

“Continued donor support through sufficient budget grants and concessional financing will be important to help Jordan cope with the refugee crisis and support the authorities’ programme goals,” he urged.

On August 24, 2016, the Executive Board approved a three-year extended arrangement under the EFF for Jordan for an amount equivalent to about $723 million at the time of approval of the arrangement, or 150 per cent of Jordan’s quota to support the country’s economic financial reform programme. 

This programme aims at advancing fiscal consolidation to gradually lower public debt and broad structural reforms to enhance the conditions for more social-friendly inclusive growth, according to the IMF website.