Press Release No. 17/237

IMF Executive Board Completes First Review Under the Extended Fund Facility for Jordan

June 21, 2017

• IMF encouraged by Jordan’s commitment to continue removing exemptions on the general sales, income tax, and custom duties.
• IMF Directors saw the critical need to advance reforms to lower the formal cost of labor to promote greater employment opportunities, especially for the youth and women.
• IMF calls for greater donor support through budget grants to help Jordan cope with the Syrian refugee crisis.

The Executive Board of the International Monetary Fund (IMF) today completed the first review of Jordan’s economic performance under the Extended Arrangement under the Extended Fund Facility (EFF). The completion of the first review enables the disbursement of SDR 51.465 million (about US$71 million), bringing total disbursements under the program to SDR 102.93 million (about US$141.9 million).

The Executive Board also approved the authorities’ requests for waiver of non-observance of performance criterion on the NIR of the Central Bank of Jordan (CBJ) and the rephrasing of access.

On August 24, 2016, the Executive Board approved a three-year extended arrangement under the EFF for Jordan for an amount equivalent to SDR 514.65 million (about US$723 million at the time of approval of the arrangement, or 150 percent of Jordan’s quota) to support the country’s economic financial reform program. This program aims at advancing fiscal consolidation to gradually lower public debt and broad structural reforms to enhance the conditions for more social-friendly inclusive growth.

Following the Executive Board’s discussion on Jordan, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, said:

“The Jordanian economy has performed favorably under a difficult external environment. Macroeconomic stability and external viability have been maintained thanks to a prudent monetary policy and progress in reducing the fiscal deficit. However, with below-potential economic growth, high unemployment, and difficult social conditions, steadfast implementation of reforms is critical to preserve these achievements and enhance inclusive growth.

“The authorities are committed to continue with a gradual and steady fiscal consolidation to bring public debt toward more sustainable levels. To help public finances rest on a sounder foundation, the removal of exemptions on the general sales tax and custom duties will continue over the program period. These reforms are being complemented by others to tackle tax evasion, rationalize expenditures, contain contingent liabilities, and improve the financial condition of the energy and water sectors.

“The Central Bank of Jordan has tightened its monetary policy stance since November 2016 and stands ready to increase the policy interest rates further to support the peg. The banking system is well capitalized and profitable. The gradual adoption of Basel III, and the authorities’ decision to complement it with an additional capital buffer, provide important resilience to shocks and will help preserve financial stability.

“Efforts to promote financial inclusion and facilitate access to credit and improve the business environment should help support investment and productivity, and enhance inclusive growth. Further reforms to reduce the cost of formal jobs are critical to address high unemployment, particularly for young people and women.

“Continued donor support through sufficient budget grants and concessional financing will be important to help Jordan cope with the refugee crisis and support the authorities’ program goals.”