Press Release No. 23/386

IMF Reaches Staff Level Agreement with Jordan on a New US$1.2 billion 4-Year Arrangement Under the Extended Fund Facility

November 9, 2023

• IMF staff and the Jordanian authorities reached a staff-level agreement on a program of economic and structural reforms, supported by a new 4-year Extended Fund Facility (EFF) arrangement, in the amount of about US$ 1.2 billion.
• Over the past years, the Jordanian authorities’ performance under the existing EFF arrangement was consistently strong. As a result, Jordan has maintained macro-economic stability in the face of successive external shocks, reduced fiscal and external imbalances, and preserved market access, while strengthening social safety nets. Progress was also made in advancing structural reforms to boost inclusive growth.
• The new program will continue to support Jordan as it weathers new shocks, with focus on continuing with fiscal consolidation to place public debt on a steady downward path, safeguarding monetary and financial stability, and accelerating structural reforms to support growth and enhance job creation.

Washington, DC: A staff team from the International Monetary Fund (IMF), led by Ron van Rooden, visited Amman during October 30 – November 9, 2023, to discuss a new program of reforms supported by the IMF’s Extended Fund Facility (EFF). Jordan expressed interest in a new program in June 2023. Discussions on the new program were launched during the authorities’ visit to Washington DC in July this year.

At the conclusion of the mission, Mr. van Rooden issued the following statement:

“The IMF team and the Jordanian authorities have reached a staff-level agreement on a new economic program under a 4-year arrangement under the Extended Fund Facility (EFF), with access of 270 percent of quota, equivalent to SDR 926.374 million, or about US$ 1.2 billion at current exchange rates. The new EFF arrangement will replace the existing arrangement that was set to expire in early 2024. It builds on the strong performance under the existing program. All commitments that had been set for the seventh review have been met, including several ahead of schedule.

“The agreement is subject to IMF management approval and consideration by the Executive Board, which are expected in early January 2024. Upon Board approval, Jordan would have immediate access to SDR 144.102 million (about US$ 190 million).

“The current EFF arrangement has helped Jordan build resilience, enabling it to withstand successive shocks. The external environment remains challenging. Global and regional tensions are high, interest rates are expected to remain higher for longer, and global growth is unevenly distributed. The conflict in Gaza and Israel poses yet another risk to the region and could adversely affect Jordan’s economy. Barring significant escalation, the Jordanian economy can overcome this shock, with strong support from its international partners. A new EFF arrangement will further strengthen Jordan’s resilience and help it maintain stability in the face of new shocks.

“Jordan’s economy is still expected to grow by 2.6 percent in 2023, with strong performance across all sectors in the first three quarters. The higher interest rate environment has contributed to a low rate of inflation, reflecting CBJ’s commitment to safeguard the exchange rate peg. Inflation declined to just over 1 percent in September 2023. The current account deficit is expected to improve in 2023, to just over 7 percent of GDP and international reserves are strong.

“Growth is projected to be held back by the impact of the conflict, not exceeding 2.6 percent in 2024, while the current account is expected to narrow less than expected earlier, to 6.5 percent of GDP. With sound economic policies and strong international support, reserves are projected to remain strong. The outlook would worsen in the event of an intensification of the conflict.

“The policies underpinning the new EFF arrangement are guided by Jordan’s Economic Modernization Vision. The aim is to accelerate growth over the medium term to address persistent high unemployment, while ensuring continued macro-economic stability. The authorities will continue to rebuild fiscal and reserve buffers and create a more dynamic private sector that can create more jobs.

“Fiscal policy under the new program will be anchored by the goal to place public debt on steady downward path, bringing public debt to below 80 percent of GDP by 2028. To achieve this, and cement progress made in reducing the budget deficit in the last few years, Jordan will continue with sound fiscal policies and reforms aimed at balancing the need for fiscal consolidation, by further broadening the tax base and enhancing spending efficiency, with bolstering social assistance and supporting growth.

“The CBJ’s policies will continue to be aimed at preserving monetary and financial stability. Monetary policy will continue to be underpinned by the CBJ’s firm commitment to the peg to the US dollar. The peg has served Jordan well, by providing a credible nominal anchor. Under the CBJ’s prudent supervision, the banking sector remains resilient, liquid and well capitalized, and Jordan successfully exited the FATF grey list.

“Structural reforms will be accelerated, with the aim of creating a more dynamic private sector that can create more jobs and achieve a meaningful reduction in unemployment, especially among women and youth. Improving the business environment, including by making it easier to start and operate a business, enhancing competition and access to finance, and reforming labor markets are key to attracting higher levels of investment and to achieving these goals. Strong efforts in utilities sector reform are crucial to ensure the sector’s financial viability and improve its ability to deliver essential services.

“The staff team is grateful to the authorities for the candid and constructive discussions. The team met with Prime Minister Khasawneh, Deputy Prime Minister Shraideh, Minister of Finance Al-Ississ, Minister of Planning and International Cooperation Toukan, Governor of the Central Bank of Jordan Al-Sharkas; and other Ministers and senior government and CBJ officials. Staff also had productive discussions with members of parliament, the private sector, civil society organizations, and development partners.”