IMF Executive Board concludes 1st review under Jordan’s EFF arrangement

AMMAN — The Executive Board of the International Monetary Fund (IMF) on Tuesday completed the first review of Jordan’s performance under the programme supported by the Extended Fund Facility (EFF), according to an IMF statement made available to The Jordan Times. 

Jordan’s four-year EFF of SDR 926.37 million (about $1.3 billion, equivalent to 270 per cent of Jordan’s quota in the IMF), was approved by the IMF’s Board on March 25, 2020.

The IMF has enhanced the built-in flexibility in the programme to accommodate spending needed to prevent, detect, control, treat and contain the spread of COVID-19 pandemic, as well as additional social protection spending. 

In competing the review, the IMF Executive Board approved the waivers of non-observance on the performance criteria on the central government primary deficit and the combined public deficit (both excluding grants), the statement said.

The board also approved the modification of targets going forward, and rephasing of structural conditionality, as well as the authorities’ request to rephase access under Jordan’s EFF arrangement by bringing forward about $150 million in Fund disbursements into 2021–22 to support near-term financing needs emerging in the aftermath of COVID-19. 

The completion of the review will make SDR 102.93 million (about $148 million) immediately available. This brings total IMF disbursements to Jordan in 2020 to SDR 497.41 million (around $689 million) including an SDR 291.55 million (about $401 million) purchase in May under the Rapid Financing Instrument, according to the statement. 

COVID-19 has taken a toll on the economy with unemployment rising to record high and fiscal and external deficits widening. 

The fund’s financial support will help Jordan meet these challenges and catalyse support from other development partners, read the statement. 

 “The impact of COVID-19 on the Jordanian economy has been sizable, but the authorities have responded with timely and targeted measures to protect lives and livelihoods, while also preserving debt sustainability and market access,” said Mitsuhiro Furusawa, IMF Deputy Managing Director and Acting Chair, in a statement issued following the Executive Board discussion of Jordan’s economic programme. 

Despite sizeable challenges, the authorities remain committed to gradually rebuilding policy buffers and arresting the rise in public debt; preserving the credibility of the peg; accelerating electricity sector reforms; and enhancing labour market, business climate, and governance reforms to promote higher and more inclusive growth, Furusawa said. 

“In the near term, fiscal policy continues to focus on supporting the economy, with enhanced flexibility in the programme to accommodate unanticipated spending related to the pandemic, as well as additional social protection spending. High quality fiscal measures should underpin a gradual fiscal consolidation as the recovery takes hold. In this regard, the authorities’ strategy should focus on broadening the tax base through both tax policy and tax administration reforms; eliminating pressures from public utilities and public-private partnerships; and improving the fairness, efficiency, and transparency of public finances,” he said. 

“Monetary policy should remain supportive given the still-fragile economy, while safeguarding the peg. The financial system is sound, but continued efforts will be needed to preserve its stability and promote financial inclusion. The Financial Sector Assessment Programme update in 2022 will provide a timely and comprehensive diagnostic and help lay out a roadmap for medium-term financial sector reforms. 

“Sustained efforts are needed to achieve durable, inclusive, and jobs-rich growth. Reforms should focus on improving the business climate, reduce unemployment, particularly among women and youth, enhancing competitiveness, and strengthening governance. On the latter, the in-train amendments to the illicit gains law, publication of details of COVID-related spending, and initiation of a review of the most significant power purchase agreement, are welcome steps.  

“While the COVID-19 outbreak continues to pose significant risks to program implementation, these are mitigated by the authorities’ strong commitment to the program. This, together with stepped up financial support from development partners, especially in the form of grants, will help Jordan achieve program objectives, build a stronger economy, and support refugees,” Furusawa said.

Finance Minister Mohamad Al-Ississ said that the IMF Executive Board’s approval of the first review of the programme with Jordan stresses the Kingdom’s commitment to carrying out structural reforms that can help realise economic recovery and growth. 

Al-Ississ said that the first review “was conducted under difficult circumstances the world is witnessing due to second wave of the COVID-19 pandemic”, the Jordan News Agency, Petra, reported.

The minister voiced concern over the increase in unemployment rates, mainly among the youth, due to the pandemic crisis, which poses “the biggest challenge for the government”.

He noted that the government’s priority in the current stage is achieving economic recovery and positive growth rates to create more jobs. 

He also expressed appreciation of the IMF mission team, including its head Ali Abbas and the fund’s resident representative in Jordan Karim Ismail, for their efforts in concluding the review.