IMF open to new programme good for Jordan

27-10-2019 04:55 AM

Ammon News - AMMONNEWS - The International Monetary Fund (IMF) is “very supportive” of Jordan’s desire for a new programme that covers the years ahead, and the two sides agree that any such new programme could be a combination of structural reforms that can reliably increase growth and fiscal adjustments, which will put the debt to GDP ratio on a downward path, IMF mission chief to Jordan, Chris Jarvis, said.

“We are very open to discussions on a new programme… and as we think of the new programme we think of two priorities. First, is to identify structural reforms that can reliably increase growth that Jordan badly needs. Second, to continue the process of fiscal reform adjustments so the public debt to GDP ratio is set on a clear downward path even before the full benefits of the structural reforms are gained,” Jarvis said in an exclusive interview with The Jordan Times on the sidelines of the IMF’s annual fall meetings.

“Those two things together are a good basis for a new programme and my understanding is that this is also what the government would like, which is very important because ultimately what we think Jordan should do is less important than what the Jordanian government thinks that Jordan should do...If this is going to work, the policies have to be the policies of the government itself."

The IMF mission chief said that Jordan’s balance of payments “has been doing well and in fact better than we have projected at the time of the second review of the programme”.

In 2016, the IMF Executive Board approved a three-year extended arrangement under the Extended Fund Facility (EFF) for Jordan for an amount equivalent to SDR514.65 million (about $723 million, or 150 per cent of Jordan’s quota) to support the Kingdom’s economic and financial reform programme. The programme was extended until March 2022.

“Exports are higher than we had projected and imports are a bit lower partly due to lower import prices… As a result of that, the current account deficit, which is key measures for the external health of the economy, is likely to be a bit lower than we have thought, which is a good thing and it is expected to be in the area of 5-6 per cent of GDP."

Jordan’s exports increased by 6.4 per cent in the first eight months of 2019 to JD3.785 billion compared to the same period of 2018. The Kingdom’s imports stood at JD8.952 billion in the January-August period of this year, declining by 5.2 per cent compared to the same period of 2018, according to figures by the Department of Statistics.

“It is also a very good sign that the Central Bank of Jordan has been able to buy foreign exchange in the foreign exchange markets this year and at a steady and gradual pace of about $700 million so far this year, compared to sales of over $3 billion last year."

Jarvis, who will head a team in November to the Kingdom to conduct the Article IV consultation with Jordan to assess the country’s economy, said that the IMF team will also discuss what is needed to continue the programme engagement with Jordan and will focus on the 2020 budget, which is being drafted.

“We will be looking for measures in the 2020 budget that can bring the primary deficit close to the programme’s objectives, and that is important because Jordan’s debt is particularly high, which leaves it vulnerable and it is important to make some progress on that."

On the decline in revenues, he said that there have been some significant revenue slippages in 2019 for a number of causes.

“One of them is the lower prices on lower imports that have reduced sales tax revenues and customs duties revenues. There have also been some delays in things that were important for gaining revenues like delays in passing bylaws for corporate income tax. I was very happy to hear through that these bylaws are passed, which puts Jordan for a better position for 2020,” he said.

The third cause is that there is a big fall in cigarette tax revenue due to smuggling, which is resulting in non-payment of taxes. The government took steps to crack down on that and it is very important to continue to do that and prevent it from the reemerging again, Jarvis said.

“These revenues slippages are large and despite strong efforts made by the authorities, it is clear that the targets that we had for 2019 cannot now be achieved… We understand there is a limited amount to what authorities can do this year, but it will important that we try to restore things to achieve the objectives of the programme in 2020, and thus our discussions on 2020, budget will be an important part of our work."

Stressing the significance of the upcoming visit, he said: “It is important that we listen to what people in Jordan have to say and get good understanding of the problems they are facing.”

Jarvis emphasized that one feature of the current programme is measures to protect the vulnerable from the effects of adjustment.

“One element has been plans for increases in the number of beneficiaries of the National Aid Fund, and we would like to see a continuation of that…in addition, subsidies and government support is well targeted as possible to the people who need it."

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