Washington, DC: On June 30, the Executive Board of the International Monetary Fund (IMF) completed the second review of Jordan’s program supported by the Extended Fund Facility (EFF). The completion of the review will make SDR 144.1 million (about US$206 million) immediately available. This brings total IMF disbursements to Jordan since the start of 2020 to SDR 641.51 million (around US$900 million) including an SDR 291.55 million (about US$400 million) purchase in May 2020 under the Rapid Financing Instrument. The Executive Board also approved the authorities’ request to increase access under the EFF arrangement by about US$200 million. Jordan’s four-year EFF of SDR 926.37 million (about US$1.3 billion, equivalent to 270 percent of Jordan’s quota in the IMF), was approved by the IMF’s Board on March 25, 2020(see Press Release No. 20/107).
The authorities’ timely and effective policy response has helped protect jobs and the vulnerable, while preserving macroeconomic and financial stability. Still, COVID-19 has taken a toll on the economy, with unemployment rising to a record high and fiscal and external deficits widening. The Fund’s financial support will help Jordan navigate these challenges, strengthen its balance of payments, and catalyze support from other development partners, which will be critical to enable Jordan deal with the economic and social impact of the COVID shock, while hosting some 1.3 million Syrian refugees.
Following the Executive Board discussion, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, made the following statement:
“The impact of the COVID-19 pandemic has been attenuated by the authorities’ timely and well-targeted measures to save lives, protect the most vulnerable and safeguard jobs. Nevertheless, successive COVID-19 waves and the sharp decline in tourism have taken a significant human and economic toll, with unemployment reaching record high levels, and the recovery delayed. Notwithstanding these challenges, the authorities have successfully maintained macroeconomic stability, notably by meeting all key fiscal and reserve targets, and made very strong progress on a large number of critical structural reforms. Moreover, Jordan’s vaccination program, one of the first in the world to cover refugees, has recently accelerated.
“In the near term, the priority remains to manage the fallout from the pandemic. Thus, the revised fiscal targets for 2021 appropriately aim to accommodate higher spending on critical health, social protection, and job-supporting schemes. The authorities remain committed to implementing a gradual, growth-friendly, and equitable fiscal consolidation as the recovery becomes entrenched, in order to bolster public debt sustainability and ensure inclusive growth. To this end, they have advanced key reforms to close tax loopholes, broaden the tax base, and strengthen tax administration capacity. Continued high-quality reforms to enhance the efficiency and transparency of public finances will also be important.
“Monetary policy has been appropriately accommodative since the onset of the pandemic while supporting the peg. Moving forward, monetary policy needs to remain flexible and data driven, balancing the need to entrench the recovery and maintain monetary and financial stability. While the financial sector remains sound, continued vigilance is warranted given that it will likely take time for the full effects of the pandemic to be reflected in banks’ asset quality.
“Continued progress on structural reforms remains essential to ensure a durable and inclusive recovery. Reforms in the electricity sector, where the authorities are working to address the high electricity costs for businesses, remains crucial for fostering job-rich growth and enhancing competitiveness. Other reforms should also focus on improving the business environment, reducing unemployment, particularly among women and youth, and strengthening governance. In this context, the recent review of the most significant power purchase agreement was an important step.
“The pandemic has significantly increased Jordan’s external financing needs, underscoring the criticality of continued donor support, including to help shoulder the disproportionate burden Jordan has borne in hosting refugees. The authorities have demonstrated strong reform momentum and a commitment to fiscal transparency. These, together with continued implementation of reforms, as well as stepped up financial assistance from development partners, will help Jordan achieve the objectives of its program and build a stronger, more resilient, and inclusive economy.”