Washington, DC: The Executive Board of the International Monetary Fund (IMF) today completed the 2022 Article IV Consultation[1]for Jordan and the Fourth Review Under the Extended Fund Facility (EFF). The completion of the review will make SDR 137.24 million (about US$183 million) immediately available. This brings total IMF disbursements to Jordan since the start of 2020 to SDR 1,018.922 million (about US$1.356 billion) including a purchase of SDR 291.55 million (about US$407 million) in May 2020 under the Rapid Financing Instrument.
Jordan’s four-year extended arrangement amounting to SDR 926.37 million (about US$1.293 billion, equivalent to 270 percent of Jordan’s quota in the IMF), was approved by the IMF’s Board on March 25, 2020, and was augmented on June 30, 2021 to SDR 1070.47 million (about $1.425 billion, equivalent to 312 percent of Jordan’s quota in the IMF)(see Press Release No. 21/203).The conclusion of the fourth review will augment Jordan’s access under the EFF to SDR 1,145.954 million (about US$1.526 billion, equivalent to 334 percent of Jordan’s quota in the IMF).
Helped by the economic reopening, a recovery is underway supported by targeted fiscal and monetary measures. Government revenues have overperformed, reflecting concerted efforts to reduce tax evasion and close tax loopholes. However, unemployment persists at very high levels, particularly among the youth. Inflation-which has been contained in 2021-has risen slightly this year, reaching 3.6 percent at end-April. The current account deficit will narrow from 8.8 percent of GDP in 2021 to around 6.7 percent of GDP in 2022, a somewhat higher level than previously expected, primarily reflecting more elevated fuel import prices. This together with tightened global financial conditions have increased Jordan’s external financing needs. The Fund is helping Jordan meet these needs by increasing planned disbursements in 2022 by SDR 120.085 million including through augmenting access under the EFF by SDR 75.482 million. Stepped-up donor support remains critical, including to aid Jordan in hosting 1.3 million Syrian refugees.
At the conclusion of the Executive Board’s discussion, Mr. Kenji Okamura, Deputy Managing Director and Chair stated:
“Jordan’s economic recovery has continued amid an uncertain external environment. The authorities’ effective policy response to the pandemic, including early expansion of healthcare capacity, has enabled a timely and full reopening of the economy, and a nascent recovery is in train. However, high commodity prices and tighter global financial conditions represent significant headwinds going forward. Near-term policy should focus on maintaining macro-fiscal stability, while protecting the most vulnerable, and advancing reforms to boost growth and jobs.
“Key fiscal targets were met, and there is good progress on reforms to broaden the tax base and close tax loopholes. These efforts have already started to bear fruit, as reflected in the sizable revenue overperformance; and it would be important to implement the remaining legislative and administrative reforms in this area to maintain the revenue mobilization momentum. Given limited fiscal space, blanket fuel subsidies should be phased out in favor of targeted support for the vulnerable. In light of global headwinds and the monetary tightening, a more gradual medium-term path of fiscal consolidation, underpinned by high-quality measures bringing debt under 80 percent of GDP by 2027, is appropriate to support the recovery and protect the vulnerable, while preserving debt sustainability.
“Monetary policy should remain focused on supporting the peg in an increasingly volatile external environment. The authorities should remain alert to emerging balance of payments pressures and ensure that reserve adequacy continued to be preserved. The financial sector remains sound. However, banks’ asset quality should be closely monitored until the impact of the pandemic and the on-going headwinds have been fully absorbed. Subsidized lending schemes should become more targeted and gradually be phased out as the recovery gains momentum. To further enhance the AML/CFT regime, the authorities are committed to an action plan for resolving the remaining strategic deficiencies identified by the FATF.
“Strong and inclusive growth rests on steady progress on structural reforms to support female labor force participation, enhance youth employment and labor market flexibility, promote competition, reduce the costs of doing business, and strengthen governance and transparency. In this regard, advancing legislation to support female labor force participation and improve the competition regulatory framework will be critical. The successful rollout of the new electricity tariffs, which will reduce costs for businesses, is welcome. Continued efforts are also needed to address water scarcity and improve the financial sustainability of both the water and electricity sectors. In this regard, it is important to adopt financial sustainability roadmaps for the water and electricity sectors and ensure due financial diligence and transparency of the procurement process of megaprojects to address water scarcity.
“Stepped up and timely donor support will be critical to help support the authorities’ reform agenda and meet Jordan’s higher external financing needs. It will also help ease the burden of hosting 1.3 million Syrian refugees.
Executive Board Assessment[2]
Executive Directors agreed with the thrust of the staff appraisal. They commended the authorities for their swift and decisive policy actions and strong ownership and commitment to the IMF-supported program that have mitigated the effects of the pandemic and supported the recovery. However, high unemployment and continued headwinds from high commodity prices and rising global interest rates highlight the importance of persevering with strong policies and structural reforms.
Directors agreed that more gradual fiscal consolidation is appropriate to support the recovery and protect the vulnerable while safeguarding debt sustainability. They emphasized the importance of continued advances in the authorities’ commendable revenue mobilization strategy, including key legislative reforms to further broaden the tax base and close tax loopholes. Directors stressed the need to replace costly fuel subsidies with targeted support to protect vulnerable households within the approved 2022 budget envelope. They welcomed ongoing efforts to increase transparency and efficiency in public spending and SOEs, which would help accommodate priority social and capital spending. Continued donor assistance will also be critical, including to support the large number of refugees.
Directors emphasized the importance of improving the financial viability of the electricity and water sectors, including by curtailing the accumulation of arrears and closely monitoring contingent liabilities. They commended the electricity tariff reform, including the mechanism to protect vulnerable households. Given large investments in climate adaptation required to mitigate water scarcity, Directors urged timely completion of the Financial Sustainability Roadmap and due financial diligence and transparent procurement policies of megaprojects in the water sector.
Directors agreed that monetary policy should remain data driven, with a focus on supporting the peg and financial stability. Continued interest rate adjustments in response to Fed actions and adequate reserve buffers will be key. While the banking system is overall sound, Directors stressed the need to monitor bank asset quality and welcomed in this regard the ongoing FSAP update. They called for gradual unwinding of subsidized lending schemes as the recovery becomes entrenched. Directors also commended the authorities’ commitment to improving the AML/CFT framework.
Directors emphasized that unlocking Jordan’s growth potential requires accelerating structural reforms to remove obstacles to job creation, labor participation, and investment. In that context, they urged the authorities to further strengthen the competition framework, enhance gender equality in the workplace and reduce youth unemployment. Strengthening fiscal governance and transparency remains important.
It is expected that the next Article IV consultation with Jordan will be held in accordance with the Executive Board decision on consultation cycles for members with Fund arrangements.
[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.
[2]At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here:https://www.IMF.org/external/np/sec/misc/qualifiers.htm.
Table 1. Jordan: Selected Economic Indicators and Macroeconomic Outlook, 2020-27 | ||||||||||||
Act. | 3rd Rev | Est. | 3rd Rev | Proj. | 3rd Rev | Proj. | Proj. | Proj. | Proj. | Proj. | ||
6/30/2022 | 2020 | 2021 | 2021 | 2022 | 2022 | 2023 | 2023 | 2024 | 2025 | 2026 | 2027 | |
(Annual percent change, unless otherwise noted) | ||||||||||||
Output and prices | ||||||||||||
Real GDP at market prices | -1.6 | 2.0 | 2.2 | 2.7 | 2.4 | 3.1 | 2.7 | 3.0 | 3.3 | 3.3 | 3.3 | |
GDP deflator at market prices | -0.3 | 1.6 | 1.3 | 2.5 | 3.6 | 2.5 | 3.0 | 2.5 | 2.5 | 2.5 | 2.5 | |
Nominal GDP at market prices | -1.8 | 3.6 | 3.5 | 5.3 | 6.1 | 5.7 | 5.8 | 5.6 | 5.9 | 5.9 | 5.9 | |
Nominal GDP at market prices (JD millions) | 31,025 | 32,157 | 32,123 | 33,851 | 34,077 | 35,772 | 36,042 | 38,048 | 40,283 | 42,650 | 45,156 | |
Nominal GDP at market prices ($ millions) | 43,759 | 45,355 | 45,307 | 47,744 | 48,064 | 50,455 | 50,835 | 53,664 | 56,817 | 60,155 | 63,690 | |
Consumer price inflation (annual average) | 0.4 | 1.3 | 1.3 | 2.5 | 3.8 | 2.5 | 3.0 | 2.5 | 2.5 | 2.5 | 2.5 | |
Consumer price inflation (end of period) | -0.3 | 2.3 | 2.3 | 2.5 | 4.4 | 2.5 | 3.0 | 2.5 | 2.5 | 2.5 | 2.5 | |
Unemployment rate (period average, percent) 1/ | 22.7 | … | … | … | … | … | … | … | … | … | … | |
(Percent of GDP, unless otherwise noted) | ||||||||||||
Fiscal operations | ||||||||||||
Revenue and grants | 22.7 | 24.7 | 25.3 | 25.9 | 26.1 | 24.9 | 25.4 | 25.0 | 24.6 | 24.4 | 24.2 | |
Of which: grants | 2.5 | 2.4 | 2.5 | 2.7 | 2.6 | 1.6 | 2.0 | 1.6 | 1.3 | 1.2 | 1.1 | |
Expenditure 2/ | 30.0 | 31.3 | 31.7 | 30.2 | 30.8 | 29.7 | 30.4 | 29.9 | 29.8 | 29.5 | 29.0 | |
Unallocated discretionary fiscal measures 3/ | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 1.3 | 0.2 | 0.6 | 1.1 | 1.5 | 1.7 | |
Overall central government balance 4/ | -7.3 | -6.6 | -6.4 | -4.4 | -4.7 | -3.4 | -4.8 | -4.4 | -4.1 | -3.6 | -3.1 | |
Overall central government balance excluding grants | -9.9 | -9.0 | -8.9 | -7.1 | -7.3 | -5.1 | -6.9 | -6.0 | -5.4 | -4.8 | -4.2 | |
Primary government balance (excluding grants) | -5.7 | -4.7 | -4.5 | -3.1 | -3.4 | -1.1 | -2.7 | -1.6 | -0.9 | -0.3 | 0.0 | |
NEPCO operating balance | -0.3 | -0.5 | -0.6 | -1.0 | -0.3 | -0.9 | -0.7 | -0.6 | -0.5 | -0.4 | -0.4 | |
WAJ overall balance | -0.8 | -0.9 | -0.8 | -0.9 | -0.9 | -0.9 | -0.9 | -0.9 | -0.8 | -0.8 | -0.7 | |
Water distribution companies overall balance | -0.3 | -0.2 | -0.4 | -0.2 | -0.2 | -0.1 | -0.1 | -0.1 | -0.1 | -0.1 | -0.1 | |
Combined public sector balance 5/ | -7.0 | -6.4 | -6.2 | -5.1 | -4.7 | -2.9 | -4.5 | -3.3 | -2.3 | -1.6 | -1.2 | |
Consolidated general government overall balance, excl. grants | -8.2 | -7.7 | -7.1 | -6.2 | -5.2 | -4.6 | -5.3 | -4.3 | -3.4 | -2.7 | -2.0 | |
Consolidated general government primary balance, excl. grants | -3.6 | -3.0 | -2.3 | -1.6 | -0.7 | 0.0 | -0.5 | 0.7 | 1.6 | 2.3 | 2.7 | |
Government and guaranteed gross debt 6/ | 109.0 | 113.9 | 113.7 | 114.7 | 113.9 | 113.6 | 113.8 | 113.0 | 111.7 | 109.8 | 107.5 | |
Government and guaranteed gross debt, net of SSC’s holdings 6/ | 88.0 | 91.7 | 91.9 | 90.9 | 91.0 | 88.6 | 89.8 | 87.4 | 84.8 | 82.5 | 79.8 | |
Of which: external debt | 40.9 | 43.3 | 40.6 | 45.7 | 42.3 | 45.4 | 43.3 | 42.2 | 40.2 | 35.8 | 33.7 | |
External sector | ||||||||||||
Current account balance (including grants), of which: | -5.7 | -9.7 | -8.8 | -4.7 | -6.7 | -3.3 | -4.8 | -4.0 | -3.6 | -3.0 | -4.0 | |
Exports of goods, f.o.b. ($ billions) | 8.0 | 8.9 | 9.4 | 9.4 | 11.3 | 10.1 | 11.6 | 11.7 | 12.0 | 12.3 | 12.3 | |
Imports of goods, f.o.b. ($ billions) | 15.4 | 17.8 | 19.3 | 18.3 | 22.1 | 18.5 | 22.0 | 22.3 | 22.8 | 23.3 | 24.2 | |
Oil and oil products ($ billions) | 2.1 | 2.9 | 3.0 | 2.9 | 4.6 | 2.9 | 4.2 | 4.0 | 3.9 | 3.7 | 3.8 | |
Current account balance (excluding grants) | -9.1 | -12.8 | -12.1 | -8.0 | -9.9 | -6.0 | -7.9 | -6.6 | -5.8 | -5.1 | -5.4 | |
Private capital inflows (net) | 1.5 | 2.5 | 1.1 | 2.3 | 1.8 | 2.8 | 2.5 | 3.1 | 3.2 | 3.5 | 3.5 | |
Public grants and identified budget loans (excl. IMF) | 5.9 | 6.4 | 6.2 | 5.8 | 6.1 | 4.5 | 5.5 | 4.1 | 3.0 | 2.5 | 1.6 | |
(Annual percent change) | ||||||||||||
Monetary sector | ||||||||||||
Broad money | 5.8 | 3.6 | 6.7 | 4.4 | 6.1 | 5.7 | 5.8 | 5.6 | 5.9 | 5.9 | 5.9 | |
Net foreign assets | 0.2 | -12.2 | -0.8 | 9.7 | -0.2 | 13.4 | 14.6 | 6.8 | 5.4 | -2.1 | 3.2 | |
Net domestic assets | 7.4 | 7.7 | 8.7 | 3.2 | 7.6 | 4.0 | 3.9 | 5.3 | 6.0 | 7.8 | 6.5 | |
Credit to private sector | 6.3 | 3.9 | 4.9 | 4.5 | 4.1 | 4.8 | 4.3 | 5.5 | 6.0 | 6.5 | 6.9 | |
Credit to central government | 11.4 | 8.0 | 13.8 | -0.5 | 0.3 | 1.4 | 1.5 | 4.8 | 6.9 | 14.3 | 7.0 | |
Memorandum items: | ||||||||||||
Gross usable international reserves ($ millions) | 15,127 | 15,269 | 17,272 | 15,954 | 16,916 | 15,863 | 16,894 | 17,270 | 17,735 | 17,238 | 17,407 | |
In months of prospective imports | 7.8 | 7.9 | 7.6 | 8.1 | 7.4 | 7.8 | 7.3 | 7.2 | 7.3 | 6.8 | 6.6 | |
In percent of reserve adequacy metric | 110 | 104 | 115 | 102 | 105 | 97 | 98 | 96 | 95 | 91 | 90 | |
Net international reserves ($ millions) | 13,844 | 13,448 | 15,646 | 13,762 | 14,764 | 13,617 | 14,782 | 15,304 | 15,993 | 15,707 | 16,127 | |
Population (millions) 7/ | 10.2 | 10.3 | 10.3 | 10.4 | 10.3 | 10.5 | 10.3 | 10.3 | 10.3 | 10.4 | 10.4 | |
Nominal per capita GDP ($) | 4,289 | 4,395 | 4,412 | 4,588 | 4,666 | 4,817 | 4,930 | 5,200 | 5,495 | 5,798 | 6,109 | |
U.S. dollar per Jordanian dinar (period average) | 1.41 | 1.41 | 1.41 | 1.41 | 1.41 | 1.41 | 1.41 | 1.41 | 1.41 | 1.41 | 1.41 | |
Nominal exchange rate (peg to the US dollar) | 1.41 | 1.41 | 1.41 | 1.41 | 1.41 | 1.41 | 1.41 | 1.41 | 1.41 | 1.41 | 1.41 | |
Real effective exchange rate (end of period, 2010=100) 8/ | 105.4 | … | … | … | … | … | … | … | … | … | … | |
Percent change (+=appreciation; end of period) | -9.5 | … | … | … | … | … | … | … | … | … | … | |
Sources: Jordanian authorities; and IMF staff estimates and projections. | ||||||||||||
1/ The Department of Statistics changed the methodology of the Survey of Employment and Unemployment in 2017 following ILO recommendations. The variable now reports unemployment rates for Jordanians only (excluding foreigners). 2/ Includes other use of cash (i.e. off-budget expenditures). | ||||||||||||
3/ Estimated amount of fiscal measures that are needed to meet the programmed fiscal adjustment over 2022-25. | ||||||||||||
4/ Includes statistical discrepancy. | ||||||||||||
5/ Defined as the sum of the primary central government balance (excl. grants and transfers to NEPCO and WAJ), NEPCO operating balance, WAJ overall balance, and, starting in 2019, Aqaba, Miyahuna, and Yarmouk Water Distribution Companies overall balance. | ||||||||||||
6/ Government’s direct and guaranteed debt (including NEPCO and WAJ debt). SSC stands for Social Security Corporation. The authorities securitized domestic arrears amounting to 2.3 and 0.3 percent of GDP in 2019 and early 2020, respectively, part of which was previously assumed to be repaid over a three-year period. | ||||||||||||
7/ Data from the 2017 Revision of World Population Prospects of the UN population division. | ||||||||||||
8/ INS data. CBJ staff’s estimates, based on updated trade weights, shows a more moderate pace of real appreciation over the past few years. | ||||||||||||