IMF approves new $1.2bn financing support for Jordan

The four-year funding package is aimed at enhancing reforms programme and economic growth in the country

View of Amman. Jordan’s economy is expected to expand by 2.6 per cent this year. Alamy

The International Monetary Fund's executive board has approved a new $1.2 billion four-year extended fund facility (EFF) for Jordan to aid the country's economic reform programmes.

The new arrangement replaces the previous EFF that was approved in March 2020 and was set to expire in March this year.

The approval provides Jordan with immediate access to about $190 million, with the remaining amount to be phased throughout the programme, the Washington-based fund said on Wednesday.

“Jordan has weathered well a series of shocks over the past few years, maintaining macro-stability and moderate economic growth thanks to adept policy-making and sizeable international support,” said Kenji Okamura, deputy managing director and acting chair of the IMF's executive board.

“Prudent fiscal and monetary policies have reduced deficits, strengthened reserve buffers, preserved financial stability, and maintained market confidence in a challenging global and regional environment. Significant progress has also been made in implementing structural reforms.”

The IMF estimates that Jordan’s real gross domestic product will expand by 2.6 per cent this year, the same as last year.

The government's gross debt is estimated to rise to 112.7 per cent of its GDP this year from 111.5 per cent in 2023.

Public external debt is projected to increase to 44.3 per cent of its GDP in 2024, up from 42.2 per cent in 2023. That figure is expected to rise in 2025 before reducing steadily to 39.5 per cent by 2028, according to the IMF.

The latest funding will support the authorities’ efforts towards a gradual fiscal consolidation to place public debt on a “steady downwards path” by adopting measures to broaden the tax base and improve tax compliance, while also protecting social and capital spending,

“The planned expansion of social assistance, with further improvements in targeting, will be key to ensuring adequate protection of vulnerable households,” Mr Okamura said.

“Improving the efficiency and viability of public utilities also remains crucial for preserving the sustainability of public finances, while ensuring the delivery of essential services.”

The Central Bank of Jordan also maintained its prudent policies, which have supported the peg of the currency to the US dollar.

“The peg has served Jordan well and helped keep inflation low. Monetary policy should continue to focus on preserving monetary and financial stability, by adjusting policy rates as needed to support the peg,” Mr Okamura said.

Inflation is projected to rise to 2.7 per cent this year, from an estimated 2.2 per cent in 2023.

The new financing arrangement builds on Jordan’s “strong performance” under the previous arrangement, the fund said.

Six reviews were completed on time and all commitments that had been set for the seventh review were met.

“Further progress in implementing structural reforms to improve the business environment and attract private investment is crucial to create a dynamic private sector, foster job-rich growth and achieve the objectives of Jordan’s economic modernisation vision,” Mr Okamura said.

Strengthening competition, further reducing red tape and instituting labour market reforms to lower youth unemployment are also critical for continued progress, he added.

Unemployment in Jordan stood at 22.9 per cent in 2022, according to the latest IMF figures.

The country, which is home to a large number of refugees, is heavily dependent on aid to support its economy.

About 670,000 Syrian refugees are registered with the UN in Jordan, as well as two million Palestinian refugees.

“Donor support remains essential to help Jordan navigate the challenging external environment, host a large number of refugees, and maintain the reform momentum,” Mr Okamura said.