IMF Mission Reaches Staff-Level Agreement on Completion of the Fifth Review Under the Stand-By Arrangement with Jordan
The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF’s Executive Board for discussion and decision.
An International Monetary Fund (IMF) mission visited Amman during September 9–21, 2014 to review Jordan’s economic program, supported by a Stand-By Arrangement (SBA). The discussions with the authorities continued this week during the IMF-World Bank Annual Meetings in Washington, D.C. The 36-month SBA in the amount of SDR 1.364 billion (about US$2 billion, or 800 percent of Jordan’s quota at the IMF) was approved by the Executive Board on August 3, 2012 (see Press Release No. 12/288). The third and fourth reviews under the SBA were approved by the Board on April 28, 2014, bringing total disbursements to SDR 852.50 million–about US$1.3 billion (see Press Release No. 14/183).
Ms. Kristina Kostial, IMF Mission Chief for Jordan, issued the following statement today in Washington, D.C.:
“We welcome the authorities’ commitment to, and progress in, implementing their economic program despite an increasingly difficult regional environment, including spillovers from the tragic situations in Syria and Iraq. Building on strong performance this year, we reached a staff–level agreement on the fifth review under the SBA and on reducing the number of remaining reviews under the program; the outstanding disbursements will be distributed equally across those reviews. This agreement is subject to approval of the Executive Board, which is scheduled to consider the review during the first half of November. Board approval would make available to Jordan SDR 85.25 million (about US$129 million). The next review mission has been tentatively scheduled for the second half of February 2015.
“Jordan’s economy performed well during 2014. Helped by a recovery in mining and better activity in the tourism and utilities sectors, growth stood at 3 percent year-on-year in the first half of the year. With a further slowdown in food prices, headline inflation dropped to 2.7 percent year-on-year in September. The current account deficit continues to narrow significantly, the banking sector remains robust, and financial markets are stable.
“Program performance is broadly on track. The central government’s budget has been tightly managed, and the fiscal deficit is expected to stay on target through the remainder of 2014. International reserves have been over-performing and are foreseen to continue to do so. Owing to shortfalls in gas flows from Egypt, the electricity company NEPCO incurred additional losses, which will be financed mostly from grants. At the same time, reforms supporting growth and employment have gained some traction with parliament recently adopting the Public-Private Partnership and investment laws, which are broadly in line with international standards.
“The economy is expected to gradually strengthen. Growth is projected to increase to 3.3 percent in 2014, and to 4.5 percent in the medium term. Inflation is expected to decline to 2.9 percent at end-2014, and 2 percent in the medium term. The current account deficit (including grants) would continue to substantially improve to less than 4 percent of GDP in the outer years of the medium term, mostly reflecting a lower energy import bill. Risks to this outlook remain high, mostly related to the Syria and Iraq conflicts.
“The authorities are pursuing their program of reforms to keep the fiscal and external balances on a sustainable path while fostering inclusive growth. Public sector consolidation will continue so as to return the still-rising debt on a downward trend. On the fiscal front, the authorities designed a set of expenditure and revenue measures—most of which have already been implemented— that would deliver next year’s programmed adjustment in an equitable way minimizing any adverse impact on growth and without unduly burdening Jordan’s population. The authorities have also been working with parliament on the draft income tax law, an initiative which would help achieve a more equitable distribution of the burden of adjustment in addition to raising revenue. On the energy front, the authorities are sustaining the implementation of their medium–term strategy to diversify Jordan’s energy sources and return the electricity company to cost recovery while targeting electricity subsidies to those in need. Monetary policy will remain focused on safeguarding macroeconomic stability and preserving reserve buffers. Progress in structural reforms will continue. In this regard, Vision 2025—a strategy document currently under discussion—is an opportunity to embed sectoral reforms in an overarching framework with an emphasis on labor market reforms and further improvements in the business climate.”
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