Jordan—IMF Executive Board Concludes 2024 Article IV Consultation and Second Review Under the Extended Fund Facility
December 12, 2024
- Jordan’s EFF-supported program, approved in January 2024, remains on track. The completion of the second program review makes another SDR 97.784 million (about US$131 million) available to Jordan, out of the previously approved program size of SDR 926.370 million (about US$1.2 billion).
- Jordan continues to show resilience and maintain macro-economic stability, despite the headwinds caused by the regional conflict. This resilience reflects the authorities’ continued implementation of sound macro-economic policies and reform progress.
- Bringing the Jordanian economy onto a higher growth trajectory is essential to create more jobs and raise prosperity. This requires accelerating structural reforms, while maintaining macro economic stability. Strong and timely international support also remains crucial to help Jordan navigate through the external headwinds, while shouldering the costs of hosting a large number of Syrian refugees.
Washington, DC: The Executive Board of the International Monetary Fund (IMF) today completed the 2024 Article IV consultation[1] with Jordan and the second review under the arrangement under the Extended Fund Facility (EFF). Jordan’s four-year arrangement, amounting to SDR 926.37 million (about US$1.2 billion, equivalent to 270 percent of Jordan’s quota in the IMF), was approved by the IMF’s Board on January 10, 2024 (see Press Release No. 24/004). The completion of the second review makes another SDR 97.784 million (about US$130 million) available to Jordan, bringing total disbursements under this arrangement to SDR 339.67 million (about US$453 million).
Jordan continues to show resilience and maintain macro-economic stability, despite the headwinds caused by the regional conflict and the heightened uncertainty. Jordan’s economy continues to grow, and inflation is low. This resilience is the result of the authorities’ continued pursuit of sound macro-economic policies and reform progress over the past several years, as well as sizable international support. Reflecting the authorities’ commitment to sound policies, performance under Jordan’s IMF-supported program remains strong. All quantitative performance criteria and structural benchmarks for the second program review were met and steady progress is made toward achieving the program’s overall objectives.
Nonetheless, as the conflict continues and has widened, it is having a larger impact on Jordan’s economy than anticipated at the outset of the program, dampening economic growth and affecting government finances. Growth is projected to moderate to 2.3 percent in 2024, from 2.7 percent in 2023. While only slightly down from earlier projections, the composition of growth is changing, with stronger net exports offsetting weaker domestic demand. Growth is projected to continue to be held back in 2025, at 2.5 percent, but is projected to pick up in the following years, assuming a resolution of the conflict and on the back of continued sound macro-economic policies and further progress in reform implementation. Risks to the outlook remain high, however. With moderate growth rates, progress in reducing unemployment has been limited and the unemployment rate remains high at 21 percent.
Inflation is projected to remain low, at about 2 percent, reflecting the Central Bank of Jordan’s firm commitment to monetary stability and the exchange rate peg. Jordan’s external position remains relatively strong. The current account deficit is projected to widen slightly this year and next, to just under 5 percent of GDP, from under 4 percent of GDP in 2023, with lower tourism receipts and lower prices for key exports. The CBJ’s international reserves remain at comfortable levels. The financial sector remains healthy and well-capitalized.
Government revenues have been adversely affected this year by the weaker domestic demand, as well as a sharper-than-expected drop in the prices of key export commodities. The authorities have taken strong actions to offset the revenue shortfall to contain this year’s central government budget deficit and will continue with a gradual fiscal consolidation in 2025, to reduce public debt and ensure medium-term fiscal sustainability.
Following the Executive Board discussion, Mr. Okamura, Acting Chair and Deputy Managing Director, made the following statement:
“Jordan’s economy continues to show resilience in the face of the regional conflict, thanks to adept policy making and international support. Prudent fiscal and monetary policies have maintained macro-economic stability, strengthened reserve buffers, preserved financial stability, and maintained market confidence in a challenging global and regional environment.
“Solid progress has been made in the last few years in advancing a gradual fiscal consolidation and strengthening fiscal sustainability. With revenues impacted this year by the effects of the conflict on Jordan’s economy, this year’s budget deficit is contained by careful spending prioritization. Looking ahead, efforts should continue to further enhance revenue mobilization and spending efficiency to keep public debt on a steady downward path, while protecting priority social and capital spending. Efforts should also continue to improve the efficiency and viability of the public utilities to preserve the sustainability of public finances, while ensuring the delivery of better services.
“Monetary policy remains appropriately focused on safeguarding monetary and financial stability, and supporting the exchange rate peg that has served Jordan well and helped keeping inflation low. Jordan's banking sector remains healthy, and solid progress has been made in implementing the recommendations of the 2023 Financial System Stability Assessment.
“Sustained progress in implementing structural reforms to improve the business environment, promote competition, and attract private investment is crucial to create a dynamic private sector, foster job-rich growth, and achieve the objectives of Jordan’s Economic Modernization Vision. In this regard, structural reforms should be accelerated to enhance competition, reduce red tape, and increase labor market flexibility. Strong and timely donor support remains essential to help Jordan navigate the challenging external environment, host the large number of refugees, and meet Jordan’s development objectives, including to address the impact of climate change.”
An updated press release with more details on the Article IV discussions will be issued.
[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
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