Press Release No. 20/26

IMF Reaches a Staff-Level Agreement with Jordan on a Four-Year Extended Fund Facility

January 30, 2020

• The IMF mission and the Jordanian authorities have reached a staff-level agreement on a new four-year program. It is centered on increasing growth and stimulating job creation, strengthening external and fiscal stability, increasing transparency, and improving social spending.
• The structural reform agenda is designed to improve the investment climate and reduce costs to businesses, which will make it easier to create jobs while also protecting Jordan’s poor and most vulnerable.
• Financing support from Jordan’s international partners will be critical to support the government’s reform efforts.

The Jordanian authorities and a team from the International Monetary Fund (IMF), led by Chris Jarvis, have reached a staff-level agreement on a 48-month arrangement under the Extended Fund Facility (EFF) for around $1.3 billion. This agreement is subject to IMF management approval and Executive Board consideration, which is expected in March, following the completion of agreed prior actions.

Following the conclusion of discussions, Mr. Jarvis made the following statement today in Amman:

“The agreed economic program, to be supported by an arrangement under the EFF, will reinforce the authorities’ ambitious macroeconomic and structural reform agenda for the next four years—an agenda underpinned by their five-year reform framework, which attracted significant support from the international community at the London Initiative in 2019. The authorities’ program aims at enhancing the conditions for more inclusive economic growth, particularly in light of the challenges posed by ongoing regional conflict and uncertainty. In this regard, the hosting of Syrian refugees is a testament to Jordan’s generosity and resilience. Donor support for this effort and for the program continues to be essential.

“Fiscal and monetary policies under the program will continue to safeguard macroeconomic stability; by reducing fiscal and external vulnerabilities in an equitable, growth-friendly, and inclusive manner. A gradual and steady fiscal consolidation and reform path will help bring down public debt over the program period, while allowing sufficient space for social and capital spending. Monetary policy will continue to be anchored by the exchange rate peg, which serves the economy well. International reserves will be maintained at comfortable levels.

“In addition to macroeconomic stability, the program is centered on a pro-growth reform agenda—which is based on measures to improve tax administration and reduce tax evasion, as well as more effective public-sector investment, reduced business costs, and measures to improve government transparency and the investment climate. Key reforms include reduced electricity prices for businesses to improve competitiveness, together with development of a plan to reduce production costs and direct households’ subsidies only to those who need it. In addition, the authorities will introduce measures to help young people and women enter the labor force and will reform the Illicit Gains Law to improve Jordan’s asset-declaration system for public officials. This last measure will help improve accountability and raise public trust.

“GDP growth is projected to reach 2.1 percent in 2020 and will increase gradually in the coming years; reaching 3.3 percent over the medium term and reinforced by the program’s structural-reform timetable. Inflation will remain subdued in 2020, at under 1 percent (y/y), but is expected to converge to 2.5 percent over the next few years. External imbalances have narrowed—building on a significant improvement last year, in which the current account deficit fell from 7 percent of GDP to 2.9 percent, the deficit is expected to remain moderate over the medium term.

“We would like to thank our counterparts in Jordan for an open and fruitful dialogue. We held a wide-ranging set of meetings with the prime minister, the minister of finance, the minister of planning and international cooperation, the central bank governor, other senior cabinet ministers and officials, members of parliament, donors, key business leaders, and representatives from civil society.”