IMF praises Jordan’s progress in economic correction

AMMAN — The International Monetary Fund (IMF) has praised Jordan’s economic correction measures and the Central Bank of Jordan’s (CBJ) policies geared towards monetary stability. 

The remarks came as an IMF team, led by Martin Cerisola, concluded a visit to the Kingdom that extended between May 2 and 11 to complete discussions on the 2017 Article IV Consultation and First Review under Jordan’s economic programme supported by an Extended Fund Facility (EFF) arrangement. 

In the statement, Cerisola commended the authorities' efforts in continuing to gradually remove the general sales tax and customs duties exemptions (excluding health and basic food items) for the years ahead.

In addition, “the recent steps by the Central Bank of Jordan to raise its policy rates have helped to better balance the need for preserving an adequate reserves buffer and confidence in the Jordanian dinar peg against the need to provide supportive credit conditions to the economy", Cerisola added.

In spite of challenging regional conditions, the IMF official said, the authorities have managed to proceed with programme implementation, with a “reassuring” positive fiscal outcome in 2016 and have made progress in implementing several important structural measures, particularly ones related to the energy and water sectors and public financial and debt management.

“However, international reserves were below programme goals, while there were some delays in strengthening the business environment and in submitting legislation on deposit insurance and the insurance sector and, most notably, in implementing macro-critical structural fiscal reforms,” he noted.

The IMF expected domestic, regional, and global geopolitical and security developments to continue to hinder investor confidence, exports, investment, and public finances. Recent economic indicators are “encouraging”, the fund said, pointing to a rebound in exports, remittances, and tourism in the first few months of 2017.

With the downward revisions to growth, public debt is now expected to decrease to 77 per cent by 2022, one year later than originally envisaged. 

Donor support, including through budget grants, remains highly critical to alleviate the continuous pressures due to hosting Syrian refugees, and to help the authorities meet their programme’s debt reduction and inclusive growth objectives, Cerisola said.

To support these reforms and goals, particularly in light of the recently announced Jordan Economic Growth Plan 2018-2022, improving the efficiency of public investment — including through a strict adherence to the Public- Private Partnership (PPP) framework (particularly in large sectors currently exempted) — would enhance predictability and productivity, and minimise fiscal risks, the IMF official noted.

In light of their progress in programme implementation and the authorities’ reiterated commitment to implementing their ambitious programme of economic and structural policies, the authorities and the mission have reached a staff-level agreement on the completion of the First Review under the EFF. 

The IMF executive board is expected to consider the authorities’ request to complete this review by late June 2017. 

In August last year, the board approved a three-year extended arrangement under the EFF for Jordan for an amount of about $723 million, or 150 per cent of Jordan’s quota to support the country’s economic and financial reform programme. This programme aims at advancing fiscal consolidation to lower public debt and broad structural reforms to enhance the conditions for more inclusive growth.