An International Monetary Fund (IMF) mission, led by Mr. Chris Jarvis, visited Amman from November 11–20 to conduct the 2019 Article IV Consultation, and review progress under Jordan’s extended arrangement under the Extended Fund Facility (EFF).
At the end of the mission, Mr. Jarvis issued the following statement:
“The mission had productive discussions with the Jordanian authorities. They covered recent economic developments, the economic outlook, and risks to the economy. We agreed that the priorities for the coming years are to maintain economic stability, boost growth, create jobs and strengthen social protection. As these cannot be achieved fully in the space of the few remaining months of the current IMF-supported program, discussions began on a new three-year program that could be supported by the IMF. During this mission, we made good progress toward agreement on the broad objectives of such a program. In the period ahead we aim to complete these discussions and to agree on the specific policies needed. To this end, we expect to return to Amman in late January to continue discussions.
“The Jordanian government emphasized its commitment and determination to continue the reform process and to overcome current obstacles to growth. The authorities have made important progress in maintaining economic and financial stability in recent years. Inflation is low, the balance of payments has improved, and international reserves have recently rebounded. Moreover, the financial system remains stable and the authorities have taken important steps to improve the business climate, placing Jordan as one of the world’s top three improvers, according to the World Bank’s Doing Business Indicators.
“Monetary and exchange-rate policies remain appropriate, and foreign reserves are comfortable. The authorities should continue to adjust interest rates as needed to maintain continued stability and confidence in the currency.
“Still, challenges remain. Real GDP growth has averaged only 2-2.5 percent since 2010, and unemployment remains particularly high for youth and women. Also, fiscal consolidation has been slower than envisaged. Yields from efforts to broaden the tax base and mobilize revenues to support Jordan’s fiscal and development needs have fallen short of expectations, and weaker revenues have in turn led the authorities to cut back on public investment. Slippages in 2019 were especially pronounced, and public debt remains very high. In this regard, fiscal space will be limited, suggesting that further international assistance will be critical in allowing for continued growth-enhancing reform.
“Going forward, it will be important to continue efforts to reduce vulnerabilities, increase economic resilience, and support stronger growth. To achieve this, we recommend a combination of deep structural reforms with steady and gradual fiscal consolidation that credibly places public debt on a downward path over the medium term, while also improving social protection measures
“The fiscal strategy should be supported by continued efforts to strengthen tax and customs administration, as well as measures to enhance public financial management, fiscal transparency, and governance.
“Electricity-sector reforms are vital. The energy-sector roadmap is an essential first step in placing NEPCO’s finances on a firmer footing; but should be complemented by further efforts to eliminate losses, while also reducing tariffs for commercial consumers, which are undermining the competitiveness of Jordan’s businesses.
“We encourage the authorities to continue to enhance broader private-sector growth. With the assistance of the World Bank and other partners, the authorities have outlined a concrete matrix of reforms that should, if implemented swiftly, go a long way towards improving the business climate and boosting competitiveness. In addition, pro-employment reforms will be critical for inclusive growth and stability. Recent amendments to the social security law are welcome. On the new package of employment-based cash incentives, which are designed to boost job creation and growth, it is important that such measures be implemented transparently, and that they take into account Jordan’s pressing fiscal constraints. Measures to support financial-sector development are also key in supporting inclusive growth, and continued implementation of the authorities’ financial inclusion strategy will help broaden financial access, especially for women, the poor, and small and medium enterprises (SMEs).
“Jordan can continue to maintain economic stability and enhance growth with a well-crafted and credible strategy, and with support from the international community. The Fund remains committed to continue to support the authorities as they work to deliver stronger and more sustainable growth, reduce fiscal imbalances, strengthen the business environment, increase transparency, improve living standards, and ensure that Jordan’s most vulnerable people are protected.
“Our visit provided an opportunity to meet with a broad range of counterparts, including Prime Minister Omar Razazz, Minister of Finance Mohamad Al-Ississ, Governor Ziad Fariz, other cabinet ministers, members of Parliament, and representatives from the private sector, civil society, and the international community. We are grateful for a most constructive and candid set of talks, and for the authorities’ continued cooperation and warm hospitality.”