Press Release No. 03/113

Press Release: IMF Completes First Review of Jordan's Stand-By Arrangement, Approves US$30 Million Disbursement

July 11, 2003

The Executive Board of the International Monetary Fund (IMF) completed today the first review of Jordan's performance under a two-year SDR 85.28 million (about US$119 million) Stand-By Arrangement, approved on July 3, 2002 (see Press Release No. 02/31). This decision entitles Jordan to the release of a further SDR 21.32 million (about US$30 million), which brings the total amount available under the program to SDR 31.98 million (about US$45 million). The authorities, however, have indicated that they do not intend to draw on the financing made available by the completion of this review, given the strength of their external position.

In approving the disbursement, the Executive Board also granted a waiver of Jordan's nonobservance of the structural performance criterion regarding the pension reform strategy and disability pensions.

Following the Executive Board's discussion on Jordan, Anne Krueger, First Deputy Managing Director and Acting Chair, said:

"The Jordanian economy performed strongly through 2002, despite the difficult regional environment, and the authorities should be commended for their commitment to sound macroeconomic policies and far-reaching structural reforms. The external sector has shown noteworthy strength, reflecting the authorities' steadfast approach to structural reforms, including trade liberalization. Going forward, continued export-led growth will be key to help raise living standards and employment, and alleviate poverty.

"The authorities' skillful economic management, together with international donor support, helped mitigate the impact of the war in Iraq on Jordan in early 2003. There are signs of an incipient recovery, but the authorities stand ready to adjust their policies if the recovery does not take hold.

"Further fiscal consolidation remains the cornerstone of the authorities' macroeconomic policies. The authorities have rightly adopted an ambitious fiscal deficit target for 2003, which is being supported by a package of fiscal measures implemented in May. The authorities' comprehensive pension reform strategy will also enhance fiscal sustainability over the medium and long term.

"The strengthening of the reserve position signaled scope for monetary easing. The latest reduction in interest rates is therefore welcome, as it will provide additional support to the incipient recovery.

"The loss of subsidized oil from Iraq is likely to complicate fiscal management for some time. The recent increase in domestic petroleum product prices is a good first step toward mitigating the fiscal impact of this loss. The authorities also aim to eliminate the gap between domestic and international prices for the remaining subsidized petroleum products over the medium term.

"In concluding the first review, and granting the associated waivers, the Board commended the authorities' commitment to, and strong ownership of, prudent financial policies and their solid record of policy implementation. Given the strength of the external position, the authorities' intention not to make the purchase associated with completion of this review is appropriate, and consistent with their objective of reducing reliance on Fund support over the medium term," Ms. Krueger stated.