Copyright Page
IMF Country Report No. 23/240
JORDAN
SIXTH REVIEW UNDER THE EXTENDED ARRANGEMENT UNDER THE EXTENDED FUND FACILITY AND REQUEST FOR MODIFICATION OF PERFORMANCE CRITERIA—PRESS RELEASE; AND STAFF REPORT
June 2023
In the context of the Sixth Review Under the Extended Arrangement Under the Extended Fund Facility and Request for Modification of Performance Criteria, the following documents have been released and are included in this package:
A Press Release.
The Staff Report prepared by a staff team of the IMF for the Executive Board's consideration on a lapse-of-time basis, following discussions that ended on May 17, 2023, with the officials of Jordan on economic developments and policies underpinning the IMF arrangement under the Extended Fund Facility. Based on information available at the time of these discussions, the staff report was completed on June 13, 2023.
The IMF's transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities' policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
International Monetary Fund • Publication Services
PO Box 92780 • Washington, D.C. 20090
Telephone: (202) 623-7430 • Fax: (202) 623-7201
E-mail: publications@imf.org Web: http://www.imf.org
International Monetary Fund
Washington, D.C.
© 2023 International Monetary Fund
Press Release
PRESS RELEASE
PR23/248
IMF Executive Board Completes the Sixth Review Under the Extended Fund Facility with Jordan
FOR IMMEDIATE RELEASE
The IMF Executive Board completed the sixth review of Jordan’s program supported by the Extended Fund Facility (EFF), providing the country with access to about US$32 million.
The IMF-supported program remains firmly on track, with key quantitative targets met and strong performance on structural benchmarks, reflecting the authorities’ strong ownership.
Despite a challenging global environment, Jordan’s economy is projected to continue to grow this year at 2.6 percent, and inflation has remained relatively low and is declining.
Washington, DC - June 29, 2023: The Executive Board of the International Monetary Fund (IMF) completed the sixth review of Jordan’s program supported by the Extended Fund Facility (EFF). The completion of the review will make SDR 24.017 million (about US$32 million) immediately available. This brings total IMF disbursements to Jordan since the start of 2020 to SDR 1,300 million (about US$1,735 million), including a purchase of SDR 291.55 million (about US$390 million) in May 2020 under the Rapid Financing Instrument. The Executive Board’s decision on the sixth review was taken without a meeting.1
Jordan’s four-year extended arrangement, amounting to SDR 926.37 million (about US$1,235 million, equivalent to 270 percent of Jordan’s quota in the IMF), was approved by the IMF’s Board on March 25, 2020 and augmented on June 30, 2021, to SDR 1070.47 million (about $1,430 million, equivalent to 312 percent of Jordan’s quota in the IMF). On June 30, 2022, the arrangement was once again augmented, to SDR 1,145.954 million (about $1,530 million, equivalent to 334 percent of Jordan’s quota in the IMF) (see Press Release No. 22/245).
The Jordanian authorities have managed to successfully navigate recent external shocks and maintain macro-economic stability in an uncertain and challenging environment. Thanks to the steadfast implementation of prudent fiscal and monetary policies, fiscal consolidation is on track, capital market access has been maintained, and inflation has remained relatively low and is declining, while reserve coverage is strong. Moreover, the economy is projected to continue to grow this year at 2.6 percent, despite the global headwinds. However, job creation is still weak, and unemployment remains too high.
The authorities remain firmly committed to continue with sound macro-economic policies. Fiscal policy is on track to meet this year’s deficit targets and the authorities are committed to continuing a gradual fiscal consolidation in the coming years, to reduce public debt to 80 percent of GDP by 2028, by further broadening the tax base and improving the efficiency of public spending. Monetary policy has responded quickly to U.S. Federal Reserve policy changes and remains focused on safeguarding the peg and maintaining strong reserve buffers. Importantly, structural reforms need to continue—and be accelerated—to create a more dynamic private sector that can create sufficient jobs and contribute to higher living standards. This includes further improving the business environment, including by strengthening competition, reducing bureaucracy, increasing labor market flexibility and female labor participation, and enhancing governance and transparency. It also includes improving the financial viability and efficiency of the electricity and water sectors, not only to reduce the drain on public finances, but most of all, given the threats posed by climate change, to be able to deliver essential services.
Jordan: Selected Economic Indicators, 2021-24
Consumer Price Index (annual average).
Includes the programmed amount of fiscal measures that are needed to meet fiscal targets.
Sum of the primary central government balance (exc. grants and net transfers to NEPCO-electricity company and WAJ-water company) and the net loss of NEPCO, WAJ and water sector distribution companies.
Jordan: Selected Economic Indicators, 2021-24
| 2021 | 2022 | 2023 | 2024 | |
| Proj. | Proj. | |||
| Output and Prices | ||||
| Real GDP growth | 2.2 | 2.5 | 2.6 | 2.7 |
| GDP deflator | 1.3 | 2.6 | 2.6 | 2.5 |
| Nominal GDP (in millions of Jordanian dinars) | 32,033 | 33,691 | 35,465 | 37,333 |
| Inflation 1/ | 1.3 | 4.2 | 2.7 | 2.6 |
| Unemployment | 24.1 | 22.9 | ... | ... |
| Government Finances (in percent of GDP) | ||||
| Central government fiscal operations | ||||
| Revenue and grants 2/ | 25.4 | 26.5 | 26.9 | 26.4 |
| Of which: grants | 2.5 | 2.4 | 2.3 | 2.0 |
| Expenditures 2/ | 31.8 | 32.4 | 32.0 | 31.4 |
| Primary government balance (exc. grants, NEPCO, and WAJ) | -4.5 | -3.7 | -2.9 | -2.0 |
| Combined public sector balance 3/ | -5.9 | -5.2 | -4.8 | -3.7 |
| Government gross debt | 111.7 | 114.1 | 113.8 | 114.1 |
| Government gross debt, net of SSC holdings of government debt | 89.8 | 91.0 | 90.6 | 89.3 |
| Money and Credit | ||||
| Broad money (percent change) | 6.7 | 5.5 | 5.6 | 5.6 |
| Credit to the private sector (percent change) | 4.9 | 8.0 | 5.5 | 5.8 |
| Balance of Payments | ||||
| Current account (in percent of GDP) | -8.2 | -8.8 | -7.5 | -5.4 |
| FDI (in percent of GDP) | 0.3 | 1.4 | 1.8 | 2.2 |
| Gross reserves (in months of imports) | 6.9 | 6.9 | 7.2 | 6.8 |
| In percent of Reserve Adequacy Metric | 114 | 102 | 99 | 91 |
Consumer Price Index (annual average).
Includes the programmed amount of fiscal measures that are needed to meet fiscal targets.
Sum of the primary central government balance (exc. grants and net transfers to NEPCO-electricity company and WAJ-water company) and the net loss of NEPCO, WAJ and water sector distribution companies.
Jordan: Selected Economic Indicators, 2021-24
| 2021 | 2022 | 2023 | 2024 | |
| Proj. | Proj. | |||
| Output and Prices | ||||
| Real GDP growth | 2.2 | 2.5 | 2.6 | 2.7 |
| GDP deflator | 1.3 | 2.6 | 2.6 | 2.5 |
| Nominal GDP (in millions of Jordanian dinars) | 32,033 | 33,691 | 35,465 | 37,333 |
| Inflation 1/ | 1.3 | 4.2 | 2.7 | 2.6 |
| Unemployment | 24.1 | 22.9 | ... | ... |
| Government Finances (in percent of GDP) | ||||
| Central government fiscal operations | ||||
| Revenue and grants 2/ | 25.4 | 26.5 | 26.9 | 26.4 |
| Of which: grants | 2.5 | 2.4 | 2.3 | 2.0 |
| Expenditures 2/ | 31.8 | 32.4 | 32.0 | 31.4 |
| Primary government balance (exc. grants, NEPCO, and WAJ) | -4.5 | -3.7 | -2.9 | -2.0 |
| Combined public sector balance 3/ | -5.9 | -5.2 | -4.8 | -3.7 |
| Government gross debt | 111.7 | 114.1 | 113.8 | 114.1 |
| Government gross debt, net of SSC holdings of government debt | 89.8 | 91.0 | 90.6 | 89.3 |
| Money and Credit | ||||
| Broad money (percent change) | 6.7 | 5.5 | 5.6 | 5.6 |
| Credit to the private sector (percent change) | 4.9 | 8.0 | 5.5 | 5.8 |
| Balance of Payments | ||||
| Current account (in percent of GDP) | -8.2 | -8.8 | -7.5 | -5.4 |
| FDI (in percent of GDP) | 0.3 | 1.4 | 1.8 | 2.2 |
| Gross reserves (in months of imports) | 6.9 | 6.9 | 7.2 | 6.8 |
| In percent of Reserve Adequacy Metric | 114 | 102 | 99 | 91 |
Consumer Price Index (annual average).
Includes the programmed amount of fiscal measures that are needed to meet fiscal targets.
Sum of the primary central government balance (exc. grants and net transfers to NEPCO-electricity company and WAJ-water company) and the net loss of NEPCO, WAJ and water sector distribution companies.
Title Page
JORDAN
SIXTH REVIEW UNDER THE EXTENDED ARRANGEMENT UNDER THE EXTENDED FUND FACILITY AND REQUEST FOR MODIFICATION OF PERFORMANCE CRITERIA
June 13, 2023
EXECUTIVE SUMMARY
Context and outlook. Despite a challenging global environment, Jordan's economy continues to grow, albeit at a moderate pace, and the outlook is generally positive. Inflation is slowing in response to the tightening of monetary policy and lower commodity prices, and is expected to end 2023 at 2.7 percent, from its peak of 5.4 percent in September 2022. The current account deficit is projected to narrow this year, although less than projected earlier, and international reserves to remain at a comfortable level. Notwithstanding these positive trends, job creation remains a challenge, and unemployment remains very high.
Program implementation: The program remains firmly on track, reflecting the authorities' strong ownership. All end-December 2022 performance criteria (PCs) were met, as were most indicative targets (ITs) for end-March 2023, although the ITs on electricity and water distribution companies' arrears were missed, as these sectors' underlying challenges remain large. Strong progress was also made in implementing structural benchmarks (SBs), with 6 out of 7 SBs for the period through June 2023 met. Implementation of the remaining SB hinges on technical solutions for introducing track-and-trace procedures for alcohol. Solid progress has also been made in implementing FATF AML/CFT recommendations, with a view to achieve Jordan's de-listing later this year.
Policies and risks: The authorities remain firmly committed to continue with sound macro-economic policies. Fiscal policy is on track to meet this year's deficit targets and the authorities are committed to continuing a gradual fiscal consolidation in the coming years, to place public debt firmly on a downward path. Monetary policy has responded quickly to U.S. Federal Reserve policy changes and remains focused on safeguarding the peg and maintaining strong reserve buffers. Importantly, structural reforms need to continue—and be accelerated—to create a more dynamic private sector that can create sufficient jobs and contribute to higher living standards. This also includes improving the financial viability and efficiency of the electricity and water sectors, not only to reduce the drain on public finances, but most of all, given the threats posed by climate change, to be able to deliver essential services.
Approved By
Thanos Arvanitis (MCD) and Delia Velculescu (SPR)
The team consisted of Ron van Rooden (head), Serpil Bouza, Kareem Ismail (Resident Representative), Yang Yang, Rayah Al-Farah, Diala Al Masri, Leen Aghabi (all MCD), Lahcen Bounader (FAD) and Yahia Said (SPR). Discussions were held in Amman during May 3-17, 2023. Jonathan Saalfield provided research assistance, Cecilia Pineda provided document management, and Sana Almunizel provided logistics support. Staff met with Prime Minister Bisher Al-Khasawneh, Deputy Prime Minister for Economic Affairs Nasser Shraideh, Minister of Finance Mohamad Al-Ississ, Governor of the Central Bank of Jordan Adel Al-Sharkas, Minister of Planning and International Cooperation Zeina Toukan and other senior officials, as well as private sector and civil society representatives. Mahmoud Mohieldin and Maya Choueiri (OED) participated in some of the discussions.
Contents
RECENT DEVELOPMENTS, OUTLOOK, AND RISKS
POLICY DISCUSSIONS
A. Continuing with Fiscal Consolidation while Sustaining Growth
B. Ensuring Monetary Stability and Financial Sector Resilience
C. Reforming the Electricity and Water Sectors
D. Structural Reforms to Strengthen Employment, Investment, and Governance
PROGRAM FINANCING AND SAFEGUARDS
STAFF APPRAISAL
FIGURES
1. Real Sector Developments
2. Fiscal Developments
3. External Sector Developments
4. Monetary and Financial Indicators
TABLES
1. Selected Economic Indicators and Macroeconomic Outlook, 2021-28
2a. Central Government: Summary of Fiscal Operations, 2021-28 (In millions of Jordanian dinars)
2b. Central Government: Summary of Fiscal Operations, 2021-28 (In percent of GDP)
2c. General Government: Summary of Fiscal Operations, 2021-28 (In millions of Jordanian dinars)
2d. Central Government: Summary of Quarterly Fiscal Operations, 2023-24
2e. NEPCO Operating Balance and Financing, 2021-28
2f. WAJ and Distribution Companies Balance and Financing, 2021-28
3a. Summary Balance of Payments, 2021-28
3b. External Financing Requirements and Sources, 2021-28
3c. Foreign Exchange Needs and Sources, 2021-28
3d. External Budget Financing, 2021-28
4a. Monetary Survey, 2021-28
4b. Summary Accounts of the Central Bank of Jordan, 2021-28
5. Access and Phasing Under the Extended Fund Facility (EFF) Arrangement
6. Indicators of Fund Credit, 2019-34
7. Quantitative Performance Criteria and Indicative Targets, December 2022-December 2023
8. Status of Existing and Proposed New Structural Conditionality
APPENDIX
I. Letter of Intent
Attachment I. Memorandum of Economic and Financial Policies
Attachment II. Technical Memorandum of Understanding
The Executive Board takes decisions under its lapse-of-time procedure when the Board agrees that a proposal can be considered without convening formal discussions.
