Ammon News -

An International Monetary Fund (IMF) team led by Ali Abbas proposed an increase in disbursement allocated to Jordan by around $165 million in 2022, including an augmentation of access of around US$100 million, in light of higher external financing needs, arising from global economic pressures.

This will bring total IMF disbursements over 2020-2024 to Special Drawing Right (SDR) 1,438 million (or around $2 billion), including the amount drawn under the Rapid Financing Instrument.

This is in addition to SDR 329 million (or $469 million) disbursed as Jordan’s share under the IMF General SDR allocation in August 2021.

The proposal followed an IMF team, led by Ali Abbas, in-person mission from May 8-23, 2022 with the Jordanian authorities.

The mission held discussions on the 2022 Article IV Consultation with Jordan and reached a staff-level agreement with the Jordanian authorities for the completion of the fourth review under the Extended Fund Facility (EFF) arrangement.

This agreement is subject to approval by the IMF’s management and the Executive Board.

"The authorities’ swift and decisive actions have mitigated the effects of the COVID-19 pandemic on the economy. Helped by the economic reopening, a recovery, supported by targeted fiscal and monetary measures, is underway, with real GDP growth expected at around 2.4 percent in 2022, and rising to above 3 percent over the medium-term," IMF website cited Abbas as saying.

However, Abbas added, unemployment persists at very high levels, particularly among the youth.

He said, "Inflation – which has been contained in 2021 – has risen slightly this year, reaching 3.6 percent at end-April. Supported by a stronger rebound in tourism receipts and robust exports, the current account deficit will narrow from 8.8 percent of GDP in 2021 to 6.5 percent of GDP in 2022, a somewhat higher level than previously expected, primarily reflecting more elevated fuel import prices."

"Despite the challenging circumstances brought on by the pandemic, sound policies have helped maintain macroeconomic stability. The government narrowed its primary deficit (excluding grants) by 1.2 percent of GDP to 4.5 percent of GDP in 2021. Revenue collection has remained robust, anchored in an institutional effort to tackle tax evasion and improve tax compliance," Abbas explained.

The government, he noted, are on track to meet the 2022 target for the primary deficit (excluding grants) of 3.4 percent of GDP.

"At the same time, international reserves remain adequate, helped by prudent monetary policies, a resilient banking system, and robust external financing. New electricity tariffs were rolled out in early-April, which will boost Jordan’s competitiveness by lowering the costs for businesses," Abbas added.

"Fiscal reforms will continue to center on broadening the tax base," the IMF official underlined, pointing out that the recent passage of legislation unifying the tax and customs administrations in ASEZA under the national systems has delivered an important longstanding reform.

"Going forward, it will be critical to maintain reform momentum, notably, through introducing place-of-taxation rules into the GST law; strengthening the governance of fiscal incentives for investment; and improving tax and customs administration," he further added.

Abbas said, "Due to its long-term fixed price gas import contracts for electricity generation, and adequate wheat reserves to hedge against possible global shocks, Jordan is better placed than many emerging markets to deal with higher food and fuel prices. However, it will be important to contain the cost of untargeted fuel subsidies, while protecting the most vulnerable through targeted support."

"Moreover, efforts to better track, manage and disclose fiscal risks will be essential to improving the transparency and sustainability of public finances," Abbas said.

"Finally, the authorities are committed to a fiscal strategy that will put Jordan’s public debt on a firmly downward path, achieving 80 percent of GDP in the medium-term," he pointed out.

Abbas added, "Monetary policy should continue to be anchored in safeguarding the peg which has served the economy well--consistent with the CBJ’s commitment to maintaining monetary and financial stability."

International reserves, Abbas affirmed, are projected to remain comfortable over the medium term providing an important buffer against a highly uncertain external environment.

He explained that the banking system remains well-capitalized and liquid, and non-performing loans have remained at low levels.

He said that the Article IV consultation focused on prospects for strong, resilient and inclusive growth, which rest on steady progress on structural reforms to support female labor force participation, enhance labor market flexibility, promote competition, reduce the costs of doing business, and enhance governance and transparency.

In this regard, he added, advancing legislation to support female labor force participation and strengthen the competition regulatory framework will be critical.

"Continued efforts are also needed to address water scarcity, and improve the financial sustainability of both the water and electricity sectors," he noted.

"Robust concessional support from donors, remains crucial, especially as global risks are elevated. Jordan continues to bear a disproportionate burden in supporting and hosting 1.3 million Syrian refugees, including providing all residents equal access to vaccination," the IMF mission head concluded.