The information below has become available following the issuance of the staff report. The thrust of the staff appraisal remains unchanged, but recent trends, if continued, could entail a financing need in 2012.
1. Latest data on economic activity confirm a continued rebound from the nadir of 2010. GDP growth for 2011 reached 2.6 percent, slightly above expectations. This momentum continued into the fourth quarter of 2011, where GDP increased by 3.1 percent due to strong performance in the manufacturing, transportation, and financial services sectors.
2. The drawdown of international reserves accelerated in the first quarter of 2012. Compared to end-December 2011, reserves fell by almost US$1.1 billion (10.6 percent) to reach US$9.6 billion (representing about 5.6 months of import cover) by end-March. This pace of reserve drawdown is faster than expected with reserves already below the level projected for end-2012. This is due mainly to higher prices of oil imports and the continued need to substitute more expensive refined fuel products for natural gas (to use as an alternate fuel for electricity generation). In particular, since the most recent sabotage of the Arab Gas Pipeline on the Sinai Peninsula on February 5, 2012—the thirteenth time since January 2011—there has been no flow of natural gas from Egypt to Jordan, which, if not reinstated, could have major implications for the balance of payments.
3. Recent modifications to the structure of electricity pricing are being revised. The authorities raised electricity prices for large consumers on February 1. However, on March 13 the revised electricity pricing schedule was withdrawn, due to customer complaints about billing irregularities. The authorities have formed a committee of inquiry to examine this issue, which will recommend a revised pricing schedule that progressively increases prices for higher consumption, and entails a higher average price for electricity consumers.
4. In financial markets, the broad gains seen in late February have been maintained. During March, spreads on sovereign bonds narrowed and the stock market strengthened, while long-term domestic bonds weakened.