IMF Executive Board Completes Seventh and Final Review Under the SBA for Jordan and Approves US$396.3 Million Disbursement

The conflicts in Syria and Iraq have led to a massive influx of refugees, putting enormous pressure on Jordan’s limited resources, and to disruptions in trade routes, less tourism, and a hesitant investment sentiment. At the same time, the near complete halt of gas flows from Egypt required imports of expensive fuel for electricity generation, contributing to large losses at the national electricity company and adding to the already high public debt. Jordan’s program has helped the economy weather these shocks. Gradual consolidation by the central government and public utilities, aided by lower oil prices, ensured that public debt is broadly stabilizing this year and, together with a prudent monetary policy, has preserved macroeconomic stability and supported confidence.

Abstract

The conflicts in Syria and Iraq have led to a massive influx of refugees, putting enormous pressure on Jordan’s limited resources, and to disruptions in trade routes, less tourism, and a hesitant investment sentiment. At the same time, the near complete halt of gas flows from Egypt required imports of expensive fuel for electricity generation, contributing to large losses at the national electricity company and adding to the already high public debt. Jordan’s program has helped the economy weather these shocks. Gradual consolidation by the central government and public utilities, aided by lower oil prices, ensured that public debt is broadly stabilizing this year and, together with a prudent monetary policy, has preserved macroeconomic stability and supported confidence.

The Executive Board of the International Monetary Fund (IMF) today completed the seventh and final review of Jordan’s economic program supported by a Stand-By Arrangement (SBA). The completion of the final review enables the disbursement of SDR 284.1 million (about US$396.3 million). The three-year SBA in the amount of SDR 1.364 billion (about US$2 billion) was approved by the Executive Board on August 3, 2012 (See Press Release No. 12/288).

Following the Executive Board’s decision, Mr, Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, issued the following statement:

“Jordan’s Fund-supported program has helped the country to successfully weather severe external shocks, including the conflicts in Syria and Iraq. Gradual fiscal consolidation, aided by lower oil prices, ensured that public debt is expected to start stabilizing this year and, together with a prudent monetary policy, has preserved macroeconomic stability and supported confidence.

“Although growth has slowed down in the first quarter of this year, the current account deficit is narrowing, foreign reserves remain at an adequate level, and inflation is low. Policies are on track to meet their 2015 targets. Fiscal structural reform is moving forward, financial policies are appropriately focused on further enhancing the resilience of the sector, and progress is also being made toward fostering private sector development.

“Significant challenges remain. Though major efforts have already been made, continued public sector adjustment is needed to put the high public debt firmly on a downward path, including through steadfast implementation of the energy strategy. With the 2015 budget well on track, the focus should be on identifying early the measures that will underlie the necessary 2016 budget adjustment.

“There is also a need to move on structural reforms geared to job creation, and focused on labor market reform as well as improvements in the business climate and the quality of public institutions. Vision 2025—a 10-year framework for economic and social policies—is an opportunity to address these challenges, and an important step will be to anchor it in a medium-term macro-fiscal framework.

“Close Fund engagement with Jordan will continue, including through Post-Program Monitoring.”

Jordan: Seventh and Final Review Under the Stand-By Arrangement and Proposal for Post-Program Monitoring
Author: International Monetary Fund. Middle East and Central Asia Dept.