Jordan seeks IMF assistance amid economic challenges

IMF building
International Monetary Fund. (File photo: Jordan News)
AMMAN – The Jordanian government has announced its ongoing negotiations with the International Monetary Fund (IMF) for a new national economic reform program, backed by the Fund. The aim is to bolster the national economy, meet financial requirements, and stimulate growth.اضافة اعلان

Prime Minister Bisher Al-Khasawneh has instructed his ministerial team to continue collaborating with the IMF within the framework of the existing program, which was developed by relevant Jordanian ministries and institutions and is set to conclude in March next year.

As per data from the Jordanian Ministry of Finance, Jordan's total public debt reached JD39.695 billion by the end of last June, equivalent to 114.1 percent of the gross domestic product (GDP). The government borrowed JD1.206 billion from the beginning of the year until the end of June.

The government's debt to the Jordanian Social Security Investment Fund stood at approximately JD8.446 billion as of June 2023.

Raised questions about its potential renewal
Economic expert Jawad Al-Anani has highlighted that the original program end date in 2024 has raised questions about its potential renewal. He told Jordan News that current indications suggest that the government is leaning towards seeking a renewal of IMF funding, recognizing it as a necessary preemptive step in addressing escalating financial challenges.

Regarding the economic reform project, Anani stressed the importance of aligning it with its core objectives. He emphasized the need for a cautious and prudent approach from the government in light of the current economic challenges.

He also underlined the necessity of reconsidering the energy sector through comprehensive restructuring and diversification of energy sources to reduce reliance on external providers. Resolving energy issues could positively impact water scarcity and enhance food security.

High unemployment rates and rising cost of living
Acknowledging citizens' concerns, Anani emphasized the importance of the government implementing policies to alleviate burdens during these challenging times, given high unemployment rates and the rising cost of living.

Thereby increasing debt
Meanwhile, economic expert, Yusuf Mansur highlighted the pressing issue of Jordan's growing public debt, which exceeds the GDP significantly. He told Jordan News that the interest payments on this debt outstrip the government's current financial capacity. To address this challenge, the government has essentially two options: achieving an extraordinary 15 percent economic growth rate (a challenging feat) or resorting to new borrowing to cover mounting interest expenses, thereby increasing debt.

The crucial step lies in redirecting investments toward production enhancement and income diversification to improve citizens' earnings and reduce public debt as a percentage of GDP.

Furthermore, economic expert Mohamed Al-Basheer emphasized that Jordan's immediate necessity is turning to the IMF due to challenging economic conditions, including economic contraction and sluggish growth. He told Jordan News renewing borrowing from the IMF becomes the primary option to meet treasury needs and address current expenditures and salaries.

Basheer noted that this economic downturn is a result of misguided fiscal policies. There's also a notable increase in Jordanians' bank deposits, indicating profit accumulation while evading tax obligations.

Worries to economic decline
Addressing widespread concerns among the Jordanian population, he attributed these worries to the economic decline, which has led to emigration of youth and talent seeking better job prospects abroad.

Basheer highlighted the root causes, including fiscal policy implementation, inadequate tax management, and widespread corruption within current expenditures. He also suggested the government explore options for loan repayment period facilitation and potentially negotiate a reduction in interest rates.

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