Jordan signs letter accepting terms of $700m deal with IMF

AMMAN — Jordan on Tuesday signed a letter of intent with the International Monetary Fund (IMF) for a $700 million Extended Fund Facility (EFF) programme, Minister of Finance Omar Malhas said Tuesday.

The letter, which was signed on behalf of the Kingdom by the Ministry of Finance and the Central Bank of Jordan (CBJ), will be sent to the IMF, paving the way for the approval of the final agreement by the fund’s board at its meeting slated for late August, the minister told The Jordan Times on Tuesday.

In October, the IMF will send a delegation to conduct the first review of the Jordanian economy after which “we will get around $100-$150 million” before the end of the year, said Malhas.

A total of $700 million will be deposited at the CBJ over the years of the programme that spans over 36 months, he added.

“Following the first review of the economy by the IMF and if all is good and we meet terms set by the IMF, the volume can be increased up to $900 million,” the minister said Tuesday.

Every six months, the IMF will conduct a review of the Jordanian economy, progress in the programme and reforms, said Malhas.

In June, the government announced a set of immediate fiscal measures to raise revenues and cut spending this year in line with the IMF deal. 

The approval of the EFF is expected to help catalyse loans and grants from multilateral and bilateral sources during the programme period. In support of  the Jordan Compact agreed upon during the London conference in February of 2016, donors pledged considerable financial support for Jordan to address the impact of Syrian refugees. 

Under the new deal, the government and the IMF agreed on six conditions that aim at reducing public debt to safe levels and stimulating the economy. 

The IMF requested that the government keeps the debt ratio to gross domestic product (GDP) by the end of 2016 the same as registered by the end of last year. Public debt registered by the end of last year was nearly JD24.9 billion or 93 per cent of the GDP. 

The IMF also demanded the government to reduce public debt ratio to GDP to 77 per cent by 2021.

The agreement entails establishing a public investment unit to review the government’s priority capital projects. The new facility will be housed by the Ministry of Planning and International Cooperation.

The third request both parties agreed on is publishing all final accounts of the central government and the independent public agencies by the Finance Ministry, while the fourth is about establishing a macro-fiscal unit to be like a data bank for all information the IMF and the government would need access to. 

The fifth point in the agreement is that the government has to draft a quarterly plan for financing needs of the government in coordination with the state-owned National Electric Power Company (NEPCO) and the Water Authority of Jordan, whose losses have been blamed for the budget deficit and accumulating debts.  

The sixth condition was the most important issue as viewed by economists attending the meeting Monday as it stipulates controlling the losses of NEPCO by achieving operational balance. The government will have to prepare by mid-December a mechanism to adjust power tariffs by linking them to international oil prices. 

In August 2015, Jordan completed a three-year Stand-By Arrangement with the IMF in the amount of nearly $2 billion.