Abstract
Jordan has maintained macroeconomic stability and undertook significant policy adjustment against a difficult external environment, rising socio-economic tensions, high vulnerabilities, and the hosting of a large number of Syrian refugees. The economy still faces considerable challenges. Economic growth remains below potential, unemployment is high, particularly for youth and women, the refugee crisis is weighing on the economy and public finances, gross public debt has risen to about 93 percent of GDP, the current account deficit is high, and the regional outlook remains challenging.
On August 24, 2016 the Executive Board of the International Monetary Fund (IMF) approved a three-year extended arrangement under the Extended Fund Facility (EFF) for Jordan for an amount equivalent to SDR 514.65 million (about US$723 million, or 150 percent of Jordan’s quota) to support the country’s economic and financial reform program. This program aims at advancing fiscal consolidation to lower public debt and broad structural reforms to enhance the conditions for more inclusive growth.
Following the Board’s decision, an amount equivalent to SDR 51.465 million (about US$72.3 million) is made available for immediate disbursement, the remaining amount will be phased in over the duration of the program, subject to six reviews.
Following the Executive Board discussion on Jordan, Mr. David Lipton, First Deputy Managing Director, and Acting Chair, said:
“The Jordanian economy has performed favorably under a difficult external environment, including the hosting of a large number of Syrian refugees. Macroeconomic stability has been maintained thanks to significant policy adjustment and reforms. However, economic performance remains below potential and the hosting of Syrian refugees weighs on the economy and public finances.
“The authorities have developed a comprehensive economic reform program to enhance the conditions for more inclusive growth and preserve macroeconomic stability. Early and decisive actions are expected to provide new economic opportunities, job creation, and bolster confidence under a difficult environment. While the domestic and regional conditions are challenging, the authorities’ strong commitment and their ownership of the program is welcomed. Continued donor support through sufficient grants and concessional financing as stated in the Jordan Compact, will also be important to support program goals.
“Public debt needs to be put on a downward path through gradual fiscal consolidation over the medium term while preserving essential social spending. To this end, it is critical to reduce the general sales tax and customs duty exemptions and to amend the income tax law. The electricity company NEPCO needs to reach operational cost recovery and Water Authority of Jordan’s finances should be consolidated. Public financial management should be strengthened to enhance fiscal transparency and reduce fiscal risks.
“Monetary policy has been skillfully managed, and will continue to be anchored by the exchange rate peg and focus primarily on preserving an adequate level of reserves. To further strengthen the regulatory framework, adoption of the amendments to the central bank law is a step in the right direction, and those for commercial banking law and of the secured lending and insolvency laws should be expedited.
“A swift implementation of the structural reform agenda would enhance the resilience and depth of the financial sector, the business environment, and help tackle challenges facing SMEs in terms of access to finance. Labor market reforms are needed to boost youth and female employment and lessen informality.”
Annex
Recent Economic Developments
With the implementation of program supported by Stand-By Arrangement (SBA) that expired in August 2015, Jordan has managed to maintain macroeconomic stability and undertook significant policy reforms amidst a difficult external environment, high vulnerabilities, and the hosting of a large number of Syrian refugees. However, important challenges remain: economic growth remains below potential; unemployment remains high especially among the young and women; gross public debt has risen to 93 percent of GDP; the refugee crisis is weighing on the economy and public finances; and the current account deficit is high.
To tackle these challenges, the authorities have formulated an economic and financial reform program that is underpinned by Jordan’s ten-year framework for economic and social policies (Vision 2025). This program aims at advancing fiscal consolidation and broad structural reforms to enhance the conditions for more inclusive growth.
Program Summary
The new program is designed in a flexible manner by pursuing gradual and steady fiscal consolidation to bring the debt down to safer levels while protecting the poor; and by advancing comprehensive reforms to enhance the conditions for more inclusive growth, particularly in light of the challenges posed by the regional conflicts on exports, investment, and the labor market.
Gradual and steady fiscal consolidation. The authorities’ program aims at gradual fiscal consolidation to lower public debt to about 77 percent of GDP by 2021, while providing room for capital spending and preserving social spending. Key measures include revenue-enhancing reforms to the tax system, such as reforming the tax exemptions framework and broadening the tax base;
Structural policies to promote growth and jobs. Structural reforms will be implemented in several areas to enhance competitiveness, job prospects, and foster equity, fairness, and good governance. Such measures will aim at increasing labor force participation, particularly for women and youth; reducing informality; enhancing the business environment; ensuring sustainability in the energy and water sectors; preserving social spending, and improving public accountability and good governance.
Monetary and financial policies will remain focused on maintaining adequate reserves to anchor the exchange rate. Furthermore, the authorities plan to advance several reforms to enhance the resilience and depth of the financial system, including to strengthen the regulatory framework; to enhance the Anti-Money laundering/Combating the Financing of Terrorism (AML/CFT) regime; to promote better supervision of the insurance and microfinance sectors.
Additional Background
Jordan, which became a member of the IMF on August 29, 1952, has an IMF quota of SDR 343.10 million.
For further information regarding Jordan’s relations with the IMF, please see the link: http://www.imf.org/external/country/JOR/index.htm
Jordan: Selected Economic Indicators and Macroeconomic Outlook, 2014–21
Government includes the central government and operating losses of NEPCO and WAJ.
Includes net lending, transfers to NEPCO and WAJ, and other use of cash.
Defined as the sum of the primary central government balance (excl. grants and transfers to NEPCO and WAJ), NEPCO operating balance, and WAJ overall balance.
Includes NEPCO and WAJ debt.
Data from UN population division.
INS data. CBJ staff’s estimates, based on updated trade weights, shows a more moderate pace of real appreciation over the past few years.
Jordan: Selected Economic Indicators and Macroeconomic Outlook, 2014–21
| SBA | Projections | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2014 | 2015 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | |||
| Output and prices | (Percentage change, unless otherwise indicated) | ||||||||||
| Real GDP at market prices | 3.1 | 2.9 | 2.4 | 2.8 | 3.3 | 3.8 | 4.0 | 4.0 | 4.0 | ||
| GDP deflator at market prices | 3.4 | 3.5 | 2.3 | 2.2 | 2.3 | 2.5 | 2.5 | 2.5 | 2.5 | ||
| Nominal GDP at market prices | 6.6 | 6.5 | 4.7 | 5.0 | 5.7 | 6.3 | 6.6 | 6.6 | 6.6 | ||
| Nominal GDP at market prices (JD millions) | 25,437 | 27,091 | 26,637 | 27,972 | 29,560 | 31,435 | 33,510 | 35,721 | 38,079 | ||
| Nominal GDP at market prices ($ millions) | 35,878 | 38,210 | 37,570 | 39,453 | 41,692 | 44,337 | 47,263 | 50,383 | 53,708 | ||
| Consumer price inflation (annual average) | 2.9 | 0.2 | −0.9 | −0.5 | 2.3 | 2.5 | 2.5 | 2.5 | 2.5 | ||
| Consumer price inflation (end of period) | 1.7 | 1.9 | −1.6 | 1.2 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | ||
| Unemployment rate (period average, percent) | 11.9 | … | 13.1 | … | … | … | … | … | … | ||
| National accounts 1/ | (In percent of GDP, unless otherwise indicated) | ||||||||||
| Consumption | 106.5 | 103.3 | 104.9 | 103.0 | 101.1 | 98.7 | 96.3 | 95.2 | 94.6 | ||
| Government | 16.0 | 15.2 | 15.5 | 15.8 | 14.2 | 12.3 | 10.7 | 10.7 | 10.7 | ||
| Other | 90.6 | 88.1 | 89.3 | 87.2 | 87.0 | 86.4 | 85.6 | 84.5 | 83.8 | ||
| Gross domestic investment | 21.2 | 20.3 | 19.2 | 19.5 | 20.1 | 20.8 | 21.7 | 21.8 | 21.8 | ||
| Government | 4.5 | 4.0 | 4.2 | 4.3 | 4.5 | 4.8 | 5.0 | 5.0 | 5.0 | ||
| Other | 16.8 | 16.3 | 15.1 | 15.2 | 15.6 | 16.1 | 16.7 | 16.8 | 16.8 | ||
| Gross national savings | 14.4 | 12.9 | 10.2 | 10.4 | 11.2 | 13.4 | 15.5 | 15.6 | 15.6 | ||
| Government | −3.5 | −0.4 | −2.0 | 0.5 | 1.9 | 3.7 | 5.5 | 5.5 | 5.5 | ||
| Other | 17.9 | 13.4 | 12.3 | 10.0 | 9.2 | 9.6 | 10.0 | 10.2 | 10.1 | ||
| Savings-investment balance | −6.8 | −7.4 | −9.0 | −9.0 | −8.9 | −7.5 | −6.2 | −6.2 | −6.2 | ||
| Government | −8.0 | −4.4 | −6.2 | −3.8 | −2.6 | −1.0 | 0.5 | 0.5 | 0.5 | ||
| Other | 1.2 | −3.0 | −2.8 | −5.3 | −6.4 | −6.4 | −6.7 | −6.6 | −6.7 | ||
| Fiscal operations | |||||||||||
| Revenue and grants | 27.9 | 26.1 | 25.0 | 25.8 | 26.3 | 26.2 | 25.9 | 25.6 | 25.7 | ||
| Of which: grants | 4.9 | 2.8 | 3.3 | 3.2 | 3.2 | 3.1 | 2.8 | 2.5 | 2.5 | ||
| Expenditure 2/ | 38.0 | 29.1 | 30.1 | 29.6 | 30.3 | 30.4 | 29.9 | 29.7 | 29.8 | ||
| Fiscal gap | 0.0 | 0.0 | 0.0 | 0.0 | 1.5 | 3.2 | 4.6 | 4.6 | 4.6 | ||
| Overall fiscal balance | −10.3 | −3.0 | −5.4 | −3.8 | −2.6 | −1.0 | 0.5 | 0.5 | 0.4 | ||
| Primary government balance, excl. grants, NEPCO, and WAJ | −4.5 | −2.1 | −5.2 | −3.7 | −2.5 | −0.9 | 0.9 | 1.1 | 1.2 | ||
| NEPCO operating balance | −4.6 | −1.4 | −0.9 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||
| WAJ overall balance | −1.0 | … | −1.1 | −1.3 | −1.3 | −1.2 | −1.2 | −1.1 | −1.1 | ||
| Combined public sector balance 3/ | −10.2 | … | −7.2 | −5.0 | −3.8 | −2.0 | −0.3 | 0.0 | 0.1 | ||
| Government and government-guaranteed gross debt 4/ | 89.0 | 90.0 | 93.4 | 94.4 | 94.0 | 91.0 | 86.3 | 81.7 | 77.3 | ||
| Of which: external debt | 31.2 | 34.5 | 35.2 | 36.9 | 36.9 | 37.5 | 37.6 | 37.3 | 37.0 | ||
| External sector | |||||||||||
| Current account balance (including grants), of which: | −6.8 | −7.4 | −9.0 | −9.0 | −8.9 | −7.5 | −6.2 | −6.2 | −6.2 | ||
| Exports of goods, f.o.b. ($ billions) | 8.4 | 8.1 | 7.8 | 7.5 | 7.9 | 8.5 | 9.1 | 9.7 | 10.3 | ||
| Imports of goods, f.o.b. ($ billions) | 20.2 | 18.2 | 18.1 | 17.7 | 18.2 | 18.7 | 19.4 | 20.2 | 21.3 | ||
| Oil and oil products ($ billions) | 5.5 | 3.6 | 3.3 | 2.7 | 2.9 | 3.0 | 3.2 | 3.3 | 3.6 | ||
| Current account balance (excluding grants) | −12.1 | −10.9 | −12.0 | −12.5 | −11.8 | −10.2 | −9.0 | −8.8 | −8.8 | ||
| Private capital inflows (net) | 5.3 | 4.3 | 3.7 | 4.2 | 4.3 | 4.9 | 5.5 | 5.7 | 5.6 | ||
| Monetary sector | (Percentage change) | ||||||||||
| Broad money | 6.9 | 8.2 | 8.1 | 7.6 | 6.9 | … | … | … | … | ||
| Net foreign assets | 15.4 | 7.4 | 3.5 | 5.5 | 4.3 | … | … | … | … | ||
| Net domestic assets | 4.0 | 8.5 | 9.8 | 8.3 | 7.8 | … | … | … | … | ||
| Credit to private sector | 3.7 | 6.0 | 4.8 | 10.2 | 8.5 | … | … | … | … | ||
| Credit to central government | 2.3 | −1.6 | −1.8 | 1.7 | 1.5 | … | … | … | … | ||
| Memorandum items: | |||||||||||
| Gross usable international reserves ($ millions) | 14,973 | 15,367 | 15,678 | 15,888 | 15,829 | 16,854 | 18,038 | 19,160 | 20,202 | ||
| In months of prospective imports | 8.0 | 7.9 | 8.5 | 8.4 | 8.1 | 8.3 | 8.5 | 8.6 | 8.6 | ||
| In percent of reserve adequacy metric | 135.3 | 142.3 | 135.8 | 130.0 | 122.4 | 123.0 | 123.6 | 124.8 | 126.2 | ||
| Net international reserves ($ millions) | 13,374 | 14,091 | 13,589 | 13,894 | 14,040 | 15,360 | 16,867 | 18,188 | 19,303 | ||
| Population (millions) 5/ | 7.42 | … | 7.59 | 7.75 | 7.88 | 7.99 | 8.08 | 8.17 | 8.25 | ||
| Nominal per capita GDP ($) | 4,838 | … | 4,947 | 5,092 | 5,293 | 5,553 | 5,849 | 6,169 | 6,513 | ||
| Real effective exchange rate (end of period, 2010=100) 6/ | 112.8 | … | 118.1 | … | … | … | … | … | … | ||
| Percent change (+=appreciation; end of period) | 6.9 | … | 4.7 | … | … | … | … | … | … | ||
Government includes the central government and operating losses of NEPCO and WAJ.
Includes net lending, transfers to NEPCO and WAJ, and other use of cash.
Defined as the sum of the primary central government balance (excl. grants and transfers to NEPCO and WAJ), NEPCO operating balance, and WAJ overall balance.
Includes NEPCO and WAJ debt.
Data from UN population division.
INS data. CBJ staff’s estimates, based on updated trade weights, shows a more moderate pace of real appreciation over the past few years.
Jordan: Selected Economic Indicators and Macroeconomic Outlook, 2014–21
| SBA | Projections | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2014 | 2015 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | |||
| Output and prices | (Percentage change, unless otherwise indicated) | ||||||||||
| Real GDP at market prices | 3.1 | 2.9 | 2.4 | 2.8 | 3.3 | 3.8 | 4.0 | 4.0 | 4.0 | ||
| GDP deflator at market prices | 3.4 | 3.5 | 2.3 | 2.2 | 2.3 | 2.5 | 2.5 | 2.5 | 2.5 | ||
| Nominal GDP at market prices | 6.6 | 6.5 | 4.7 | 5.0 | 5.7 | 6.3 | 6.6 | 6.6 | 6.6 | ||
| Nominal GDP at market prices (JD millions) | 25,437 | 27,091 | 26,637 | 27,972 | 29,560 | 31,435 | 33,510 | 35,721 | 38,079 | ||
| Nominal GDP at market prices ($ millions) | 35,878 | 38,210 | 37,570 | 39,453 | 41,692 | 44,337 | 47,263 | 50,383 | 53,708 | ||
| Consumer price inflation (annual average) | 2.9 | 0.2 | −0.9 | −0.5 | 2.3 | 2.5 | 2.5 | 2.5 | 2.5 | ||
| Consumer price inflation (end of period) | 1.7 | 1.9 | −1.6 | 1.2 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | ||
| Unemployment rate (period average, percent) | 11.9 | … | 13.1 | … | … | … | … | … | … | ||
| National accounts 1/ | (In percent of GDP, unless otherwise indicated) | ||||||||||
| Consumption | 106.5 | 103.3 | 104.9 | 103.0 | 101.1 | 98.7 | 96.3 | 95.2 | 94.6 | ||
| Government | 16.0 | 15.2 | 15.5 | 15.8 | 14.2 | 12.3 | 10.7 | 10.7 | 10.7 | ||
| Other | 90.6 | 88.1 | 89.3 | 87.2 | 87.0 | 86.4 | 85.6 | 84.5 | 83.8 | ||
| Gross domestic investment | 21.2 | 20.3 | 19.2 | 19.5 | 20.1 | 20.8 | 21.7 | 21.8 | 21.8 | ||
| Government | 4.5 | 4.0 | 4.2 | 4.3 | 4.5 | 4.8 | 5.0 | 5.0 | 5.0 | ||
| Other | 16.8 | 16.3 | 15.1 | 15.2 | 15.6 | 16.1 | 16.7 | 16.8 | 16.8 | ||
| Gross national savings | 14.4 | 12.9 | 10.2 | 10.4 | 11.2 | 13.4 | 15.5 | 15.6 | 15.6 | ||
| Government | −3.5 | −0.4 | −2.0 | 0.5 | 1.9 | 3.7 | 5.5 | 5.5 | 5.5 | ||
| Other | 17.9 | 13.4 | 12.3 | 10.0 | 9.2 | 9.6 | 10.0 | 10.2 | 10.1 | ||
| Savings-investment balance | −6.8 | −7.4 | −9.0 | −9.0 | −8.9 | −7.5 | −6.2 | −6.2 | −6.2 | ||
| Government | −8.0 | −4.4 | −6.2 | −3.8 | −2.6 | −1.0 | 0.5 | 0.5 | 0.5 | ||
| Other | 1.2 | −3.0 | −2.8 | −5.3 | −6.4 | −6.4 | −6.7 | −6.6 | −6.7 | ||
| Fiscal operations | |||||||||||
| Revenue and grants | 27.9 | 26.1 | 25.0 | 25.8 | 26.3 | 26.2 | 25.9 | 25.6 | 25.7 | ||
| Of which: grants | 4.9 | 2.8 | 3.3 | 3.2 | 3.2 | 3.1 | 2.8 | 2.5 | 2.5 | ||
| Expenditure 2/ | 38.0 | 29.1 | 30.1 | 29.6 | 30.3 | 30.4 | 29.9 | 29.7 | 29.8 | ||
| Fiscal gap | 0.0 | 0.0 | 0.0 | 0.0 | 1.5 | 3.2 | 4.6 | 4.6 | 4.6 | ||
| Overall fiscal balance | −10.3 | −3.0 | −5.4 | −3.8 | −2.6 | −1.0 | 0.5 | 0.5 | 0.4 | ||
| Primary government balance, excl. grants, NEPCO, and WAJ | −4.5 | −2.1 | −5.2 | −3.7 | −2.5 | −0.9 | 0.9 | 1.1 | 1.2 | ||
| NEPCO operating balance | −4.6 | −1.4 | −0.9 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||
| WAJ overall balance | −1.0 | … | −1.1 | −1.3 | −1.3 | −1.2 | −1.2 | −1.1 | −1.1 | ||
| Combined public sector balance 3/ | −10.2 | … | −7.2 | −5.0 | −3.8 | −2.0 | −0.3 | 0.0 | 0.1 | ||
| Government and government-guaranteed gross debt 4/ | 89.0 | 90.0 | 93.4 | 94.4 | 94.0 | 91.0 | 86.3 | 81.7 | 77.3 | ||
| Of which: external debt | 31.2 | 34.5 | 35.2 | 36.9 | 36.9 | 37.5 | 37.6 | 37.3 | 37.0 | ||
| External sector | |||||||||||
| Current account balance (including grants), of which: | −6.8 | −7.4 | −9.0 | −9.0 | −8.9 | −7.5 | −6.2 | −6.2 | −6.2 | ||
| Exports of goods, f.o.b. ($ billions) | 8.4 | 8.1 | 7.8 | 7.5 | 7.9 | 8.5 | 9.1 | 9.7 | 10.3 | ||
| Imports of goods, f.o.b. ($ billions) | 20.2 | 18.2 | 18.1 | 17.7 | 18.2 | 18.7 | 19.4 | 20.2 | 21.3 | ||
| Oil and oil products ($ billions) | 5.5 | 3.6 | 3.3 | 2.7 | 2.9 | 3.0 | 3.2 | 3.3 | 3.6 | ||
| Current account balance (excluding grants) | −12.1 | −10.9 | −12.0 | −12.5 | −11.8 | −10.2 | −9.0 | −8.8 | −8.8 | ||
| Private capital inflows (net) | 5.3 | 4.3 | 3.7 | 4.2 | 4.3 | 4.9 | 5.5 | 5.7 | 5.6 | ||
| Monetary sector | (Percentage change) | ||||||||||
| Broad money | 6.9 | 8.2 | 8.1 | 7.6 | 6.9 | … | … | … | … | ||
| Net foreign assets | 15.4 | 7.4 | 3.5 | 5.5 | 4.3 | … | … | … | … | ||
| Net domestic assets | 4.0 | 8.5 | 9.8 | 8.3 | 7.8 | … | … | … | … | ||
| Credit to private sector | 3.7 | 6.0 | 4.8 | 10.2 | 8.5 | … | … | … | … | ||
| Credit to central government | 2.3 | −1.6 | −1.8 | 1.7 | 1.5 | … | … | … | … | ||
| Memorandum items: | |||||||||||
| Gross usable international reserves ($ millions) | 14,973 | 15,367 | 15,678 | 15,888 | 15,829 | 16,854 | 18,038 | 19,160 | 20,202 | ||
| In months of prospective imports | 8.0 | 7.9 | 8.5 | 8.4 | 8.1 | 8.3 | 8.5 | 8.6 | 8.6 | ||
| In percent of reserve adequacy metric | 135.3 | 142.3 | 135.8 | 130.0 | 122.4 | 123.0 | 123.6 | 124.8 | 126.2 | ||
| Net international reserves ($ millions) | 13,374 | 14,091 | 13,589 | 13,894 | 14,040 | 15,360 | 16,867 | 18,188 | 19,303 | ||
| Population (millions) 5/ | 7.42 | … | 7.59 | 7.75 | 7.88 | 7.99 | 8.08 | 8.17 | 8.25 | ||
| Nominal per capita GDP ($) | 4,838 | … | 4,947 | 5,092 | 5,293 | 5,553 | 5,849 | 6,169 | 6,513 | ||
| Real effective exchange rate (end of period, 2010=100) 6/ | 112.8 | … | 118.1 | … | … | … | … | … | … | ||
| Percent change (+=appreciation; end of period) | 6.9 | … | 4.7 | … | … | … | … | … | … | ||
Government includes the central government and operating losses of NEPCO and WAJ.
Includes net lending, transfers to NEPCO and WAJ, and other use of cash.
Defined as the sum of the primary central government balance (excl. grants and transfers to NEPCO and WAJ), NEPCO operating balance, and WAJ overall balance.
Includes NEPCO and WAJ debt.
Data from UN population division.
INS data. CBJ staff’s estimates, based on updated trade weights, shows a more moderate pace of real appreciation over the past few years.