Front Matter Page
IMF Country Report No. 14/152
JORDAN
2014 ARTICLE IV CONSULTATION, THIRD AND FOURTH REVIEWS UNDER THE STAND-BY ARRANGEMENT, REQUEST FOR WAIVERS OF NONOBSERVANCE OF PERFORMANCE CRITERION AND APPLICABILITY OF PERFORMANCE CRITERION1—STAFF REPORT; PRESS RELEASES; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR JORDAN
June 2014
In the context of Article IV consultation and third and fourth reviews under the Stand-By Arrangement, the following documents have been released and are included in this package:
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on April 28, 2014, following discussions that ended on March 18, 2014, with the officials of Jordan on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on April 14, 2014.
An Informational Annex prepared by the IMF.
Press Releases including a statement by the Chair of the Executive Board, and summarizing the views of the Executive Board as expressed during its April 28, 2014 consideration of the staff report on issues related to the Article IV Consultation and the IMF arrangement.
A Statement by the Executive Director for Jordan.
The documents listed below have been or will be separately released.
Letter of Intent sent to the IMF by the authorities of Jordan*
Memorandum of Economic and Financial Policies by the authorities of Jordan*
Technical Memorandum of Understanding*
Selected Issues Paper
*Also included in Staff Report
The publication policy for staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
International Monetary Fund Publication Services
P.O. Box 92780 Washington, D.C. 20090
Telephone: (202) 623-7430 Fax: (202) 623-7201
E-mail: publications@imf.org Internet: http://www.imf.org
Price: $18.00 a copy
International Monetary Fund
Washington, D.C.
Front Matter Page
JORDAN
STAFF REPORT FOR THE 2014 ARTICLE IV CONSULTATION, THIRD AND FOURTH REVIEWS UNDER THE STAND-BY ARRANGEMENT, REQUEST FOR WAIVERS OF NONOBSERVANCE OF PERFORMANCE CRITERION AND APPLICABILITY OF PERFORMANCE CRITERIA
April 14, 2014
Executive Summary
Jordan is grappling with strong headwinds. It is facing a political transition even while the Syria crisis is stretching Jordan’s social fabrics. At the same time, gas inflows from Egypt continue to fluctuate, putting pressure on both the external and fiscal accounts.
Policies were appropriately adjusted to exogenous shocks. During 2012, they were focused on crisis management. After confidence had come back at year-end, they turned toward medium-term consolidation anchored in a bold subsidy reform. Fiscal consolidation needs to continue and more emphasis is needed on reforms to address chronically high unemployment.
Aimed at protecting external stability and reducing vulnerabilities, the main Article IV recommendations are to: (1) maintain the momentum on fiscal and public utility reforms to reduce the still rising debt, while making policies more equitable and growth-friendly; (2) preserve reserve buffers in a time of high uncertainties while further enhancing the resilience of the financial sector; and (3) foster inclusive growth and job creation by generating a business environment more conducive to investment; revisiting public sector hiring and compensation while equipping new entrants with private sector skills and addressing the constraints to female labor market participation; and enhancing the quality of institutions.
The program is broadly on track and, looking forward, will focus on deep tax reform. All end-2013 targets were met. The central government is expected to meet its end-March 2014 target, but the combined public sector deficit (of the central government and the electricity company NEPCO) will be missed because of temporary shortfalls in gas delivery from Egypt. International reserves have continued to over-perform through March. The next reviews will focus on tax reform to recoup revenue losses incurred in recent years, which reflected tax policy choices, weak tax administration, declining nontax revenue, and also a slow economy.
Jordan needs more grants to manage high risks. The main risks pertain to the Syria conflict becoming deeper and more protracted and shortfalls in gas from Egypt. Jordan is also susceptible to global spillovers, including from higher U.S. interest rates, while domestic risks are non-negligible with resistance to reforms increasing. Though shocks could be absorbed, debt would further increase and growth could suffer. Additional grants now could help ease macroeconomic pressures, generate growth, and create employment, but eventually Jordan will have to prepare for an exit from external aid.
The completion of the reviews makes available SDR170.5 million (about $258 million).
Approved By
Adnan Mazarei and Mark Flanagan
The mission team consisted of Kristina Kostial (head), Yasser Abdih, Andrea Gamba, Edouard Martin, Dmitriy Rozhkov (all MCD); Hui Jin and René Tapsoba (FAD); Christopher Wilson (MCM); and Chad Steinberg (SPR) and was assisted by Vanessa J. Panaligan, Cecilia Pineda, and Rafik Selim. The missions were joined by Sami Geadah, Alternate Executive Director, and overlapped with several World Bank missions. During December 3–17 and March 4–18, staff met with Prime Minister Abdullah Ensour, Minister of Finance Umayya Toukan, Minister of Energy and Mineral Resources Mohammad Hamed, Minister of Industry, Trade and Supply Hatem Hafez Al Halawani, Minister of Labor Nidal Alkatamine, Minister of Planning and International Cooperation Ibrahim Saif, Minister of Transport Lina Shbeeb, Minister of Water and Irrigation Hazim El-Naser, Governor of the Central Bank of Jordan Ziad Fariz, senior officials in these institutions, the electricity company NEPCO, representatives of parliament, civil society groups and the private sector as well as with development partners. The team also visited the Zaatari camp for Syrian refugees and Jordanian hosting communities.
Contents
BACKGROUND
A. Strong Headwinds
B. Program Implementation
POLICY DISCUSSION—SAFEGUARDING EXTERNAL STABILITY WHILE MANAGING RISKS
A. Policy Theme 1—Maintaining the Momentum on Fiscal Reforms
B. Policy Theme 2—Preserving Buffers and Financial Stability
C. Policy Theme 3—Inclusive Growth and Job Creation
PROGRAM ISSUES
A. Agreements
B. Modalities
STAFF APPRAISAL
BOXES
1. Macroeconomic Impact of the Syria Crisis
2. Exchange Rate Assessment
3. Jordan’s Interconnectedness
4. Water Strategy
5. Bank Offshore Exposures
6. Impediments to Growth
7. Credit to the Economy
8. Risk Assessment Matrix
FIGURES
1. Real Sector and Financial Markets, 2011–14
2. Monetary Sector Developments, 2011–14
TABLES
1. Selected Economic Indicators and Macroeconomic Outlook, 2012–19
2a. Central Government: Summary of Fiscal Operations, 2012–19 (In millions of Jordanian dinars)
2b. Central Government: Summary of Fiscal Operations, 2012–19 (In percent of GDP)
2c. Central Government: Summary of Quarterly Fiscal Operations, 2013–15
2d. NEPCO Operating Balance and Financing, 2012–17
3. Summary Balance of Payments, 2012–19
4a. Summary Monetary Survey, 2012–15
4b. Summary Accounts of the Central Bank of Jordan, 2012–15
5. Indicators of Bank Soundness, 2005–13
6. Access and Phasing Under the Stand-by Arrangement
7. Indicators of Fund Credit 2013–20
8. Capacity to Repay Indicators, 2013–19
ANNEXES
I. Public Debt Sustainability Analysis
II. External Debt Sustainability Analysis
APPENDIX
I. Letter of Intent
Attachment I. Memorandum of Economic and Financial Policies
Attachment II. Technical Memorandum of Understanding (TMU)
Front Matter Page
JORDAN
STAFF REPORT FOR THE 2014 ARTICLE IV CONSULTATION, THIRD AND FOURTH REVIEWS UNDER THE STAND-BY ARRANGEMENT, REQUEST FOR WAIVERS OF NONOBSERVANCE OF PERFORMANCE CRITERION AND APPLICABILITY OF PERFORMANCE CRITERIA—INFORMATIONAL ANNEX
April 14, 2014
Prepared By
The Middle East and Central Asia Department (In consultation with other departments)
Contents
FUND RELATIONS
WORLD BANK GROUP STRATEGY AND OPERATIONS
STATISTICAL ISSUES
Front Matter Page
Press Release No. 14/183
FOR IMMEDIATE RELEASE
April 29, 2014
International Monetary Fund
700 19th Street, NW
Washington, D. C. 20431 USA
Front Matter Page
Press Release No. 14/207
FOR IMMEDIATE RELEASE
May 7, 2014
International Monetary Fund
700 19th Street, NW
Washington, D. C. 20431 USA
Front Matter Page
April 28, 2014
