jordan pulse -
A team of experts from the International Monetary Fund (IMF), led by Ron van Rooden, visited Amman from April 29 to May 9, 2024, to conduct the first review under the IMF’s Extended Fund Facility (EFF) arrangement, which was approved by the IMF’s Executive Board on January 10, 2024.
At the conclusion of the mission, Mr. van Rooden issued the following statement:
"We are pleased to announce that the IMF team and the Jordanian authorities have reached a staff-level agreement on the first review of the authorities’ economic reform program supported by the EFF arrangement approved earlier this year. The program has started strongly, despite the challenging external environment. All quantitative performance criteria and structural benchmarks for the first review have been met, and the program is steadily progressing towards its overall objectives. This agreement is subject to approval by the IMF’s management and the Executive Board. The completion of this review will make available an amount of SDR 97.784 million (about USD 129 million) out of the previously agreed SDR 926.370 million (about USD 1.2 billion).
"Jordan’s economic performance has remained strong, reflecting the success of the previous program and sound macroeconomic policies. The Jordanian economy has proven its resilience, with economic growth reaching 2.6% in 2023, despite a slowdown in activity in the last quarter of the year following the outbreak of the war between Israel and Gaza. The current account deficit has significantly narrowed to less than 4% of GDP in 2023, and total usable international reserves have risen to more than USD 17 billion. With the Central Bank of Jordan raising interest rates in line with the decisions of the US Federal Reserve, reflecting its firm commitment to monetary stability, the annual inflation rate decreased to 1.6% in December 2023. Meanwhile, the Jordanian banking system remains liquid, profitable, and well-capitalized.
"It is worth noting that the central government’s primary deficit (excluding grants and financial transfers to public service companies) decreased to 2.7% of GDP in 2023 compared to 3.6% of GDP in 2022, through continued gradual adjustment of public finances to put public debt on a downward trajectory, despite the negative impact on government revenues from the repercussions of the Gaza war and trade disruptions. Measures have been taken to contain the operational losses of public service companies, leading to a reduction in the public sector’s consolidated primary deficit to 4.5% of GDP in 2023, compared to 4.8% of GDP in 2022. When the ongoing surpluses in the social security system are added, this has led to a total primary surplus for the general government (including grants) of 0.5% of GDP, containing public debt at 89.5% of GDP by the end of 2023.
"Uncertainty remains high with the ongoing war in Gaza and regional tensions. The continuation of the war and the disruption of trade routes in the Red Sea could impact the Jordanian economy, particularly morale, trade, and tourism. However, the Jordanian economy should continue to be able to handle these shocks well, provided the conflict does not escalate regionally. Growth is expected to moderate to 2.4% this year, and the current account deficit is expected to widen slightly to about 5% of GDP. Growth is expected to rebound in 2025 to close to 3%, and the current account deficit is expected to narrow, provided the war ends and its effects subside, supported by the continued implementation of reforms.
"Importantly, the authorities remain firmly committed to implementing sound macroeconomic policies to maintain stability and applying structural reforms to strengthen the Jordanian economy and improve the living standards of citizens, as envisaged by the economic modernization vision. The monetary policy of the Central Bank of Jordan will continue to maintain its firm commitment to pegging the Jordanian dinar to the US dollar and keeping inflation rates low. Inflation is expected to remain contained at around 2% in 2024. The Central Bank of Jordan is prepared to make policy adjustments as necessary to reliably protect monetary and financial stability.
"Furthermore, the authorities continue to gradually and fairly reduce the fiscal deficit to improve the financial sustainability of public service companies, aiming to reduce public debt to less than 80% of GDP by 2028, while ensuring adequate support for poor families and allowing for increased capital expenditure. The authorities are moving towards achieving their goal of reducing the central government’s primary deficit this year (excluding grants and transfers to public service companies) to 2.1% of GDP. In addition, the results of reforms aimed at improving the financial position of public service companies are beginning to bear fruit, which will lead to a reduction in the public sector’s consolidated primary deficit to 4.1% of GDP, thereby achieving a total primary surplus for the general government (including grants) of 1.3% of GDP and reducing public debt to just over 89% of GDP by the end of 2024.
"The expert team is grateful to the authorities for the candid and constructive discussions that took place. The team met with Prime Minister Bisher Al-Khasawneh, Deputy Prime Minister Nasser Al-Shraideh, Finance Minister Dr. Mohammad Al-Ississ, Minister of Planning and International Cooperation Zina Toukan, and the Governor of the Central Bank of Jordan, Dr. Adel Sharkas, as well as other ministers, senior government officials, and officials from the Central Bank of Jordan."