IMF releases $166m in funding after Jordan's second economic review

The disbursement brings the total aid to Jordan under Extended Fund Facility to $309m

The Jordanian capital, Amman. The kingdom gets $166m in funding from the IMF after its second economic review. EPA

The International Monetary Fund completed its second review of Jordan’s economic performance and released about $166 million (Dh609.2m) in funding to help the kingdom with gradual fiscal consolidation.

This brings the total amount disbursed under the Extended Fund Facility to $309m, the Washington-based lender said.

The IMF had approved a three-year extended arrangement under the EFF for Jordan for about $723m in August 2016, to support the country's economic and financial reform programme. The programme aims to advance fiscal consolidation to lower public debt and introduce broad structural measures to enhance the conditions for more inclusive growth.

“The [Jordanian] authorities are to be commended for preserving macroeconomic stability, maintaining a prudent monetary policy, and ensuring a sound financial system,” said Tao Zhang, deputy managing director at the IMF.

“Jordan faces a challenging environment – low economic growth, high unemployment and elevated public debt – underscoring the importance of swiftly implementing policies and reforms to bring public debt on a downward path, boost investment and productivity and enhance inclusive growth,” he said.

Jordan is under an intense financial burden of hosting 1.3 million Syrian refugees. The kingdom, which has no natural resources and has historically financed its deficits through grants and soft loans, is spending $2.5bn a year on refugees, Jordan's Prime Minister Omar Razzaz said in April.

The IMF called for increased support from donors for the Jordanian economy to help it cope with the Syrian refugee crisis. The recent London international conference to raise funds and secure investment commitments was timely, and demonstrated the international community's determination to support Jordan, Mr Zhang said.

The country has worked hard to implement the IMF's recommended changes, leading to pushback from the Jordanian people because taxes were raised and austerity measures put in place. Both the IMF and World Bank have praised the government's commitment to reform, particularly changes to the procurement system to fight corruption, measures to encourage women and refugees into employment through online jobs and making the labour market more accessible to those from outside Jordan.

The country should continue on a path of gradual and steady fiscal consolidation, with due regard to social protection needs, the fund said. Although a number of key fiscal reforms were delayed, recent amendments to the income-tax law are encouraging and will be key in helping Jordan secure a more sustainable fiscal framework, according to the IMF.

“These reforms are crucial to preserve macroeconomic and external stability, place public finances on a sounder foundation, and lessen risks to debt sustainability.”