Jordan reaches $1.3bn funding agreement with IMF

First $140m instalment of four-year programme expected in March after board approval

FILE PHOTO: The International Monetary Fund (IMF) logo is seen outside the headquarters building in Washington, U.S., as IMF Managing Director Christine Lagarde meets with Argentine Treasury Minister Nicolas Dujovne September 4, 2018. REUTERS/Yuri Gripas/File Photo
Beta V.1.0 - Powered by automated translation

Jordan has agreed on a new $1.3 billion programme with the International Monetary Fund and will receive a first instalment of $140 million by the end of March.

Jordan will receive nine instalments of $140 million to $150 million over the four-year programme, the state news agency Petra said.

Petra cited Jordan's finance minister, Mohammad Al Ississ, as saying the allocations carry a 3 per cent interest rate.

In Washington, the IMF said it reached a staff-level agreement for the $1.3bn programme that is subject to management approval and consideration by the IMF's executive board, which is expected in March. It said the programme was aimed at bolstering economic growth and stimulating job creation.

Mr Al Ississ said in December that a new IMF deal to succeed a three-year extended fund facility that ends in March would secure lower servicing costs for the $42bn in public debt that the country holds, which has spiralled in the last decade as a result of the spillover of regional conflicts on its economy.

The programme will focus on efforts to spur sluggish growth that has hovered at about 2 per cent in the last decade. Petra said on Thursday that the IMF forecast Jordanian economic growth of 2.1 per cent in 2020.

The agency cited the IMF as saying there would be no tax hikes or increase in water prices under the new programme while electricity prices would be reduced for the business sector to increase competitiveness.

The IMF statement issued in Washington said Jordan's structural reform agenda was "designed to improve the investment climate and reduce costs to businesses, which will make it easier to create jobs while also protecting Jordan’s poor and most vulnerable".

IMF-backed austerity measures in 2018, including steep tax hikes, dampened domestic consumption, dealt a blow to investor sentiment and triggered some of the largest protests in years that brought down the previous government.

Jordan is now focusing on spurring growth by more public spending which it hopes will revive consumer and business confidence. Economists warn that an expansive policy could derail fiscal stability and push higher debt which now stands at about 95 per cent of GDP.

The country's rising debt is at least in part due to successive governments adopting an expansionist fiscal policy characterised by job creation in the bloated public sector.

Past governments also hiked spending on welfare and public sector pay in a move to ensure stability in the aftermath of uprisings in the region in 2011.