Jordan reaches staff level agreement with IMF under Extended Fund Facility

Jordan reaches staff level agreement with IMF under Extended Fund Facility
Amman - With the help of the Extended Fund Facility Agreement that was agreed in January of this year, the government and the International Monetary Fund (IMF) have reached an agreement at the expert level about the first review of the economic reform program that the authorities have implemented.اضافة اعلان

In order to carry out the first assessment under the IMF Extended Fund Facility Arrangement, which was authorized by the IMF Executive Board on January 10, 2024, a group of IMF staff members led by Ron van Rooden visited Amman from April 29 to May 9, 2024.

In a press conference on Thursday, Rooden discussed the first review of the Fund with the Governor of the Central Bank of Jordan (CBJ), Adel Sharkas, and the Minister of Finance, Muhammad Al-Issis. He stated that the Jordanian economy has proven its inhibition, with economic growth reaching 2.6 percent in 2023, despite a slowdown in activity in the final quarter of the year due to the Israeli war on Gaza. The Jordanian economy has maintained its strength following the success of the previous program, reflecting sound macroeconomic policies.

He went on to say that the total amount of usable overseas reserves increased to more than $17 billion, and that the current account deficit decreased dramatically to less than 4 percent of GDP in 2023. The annual inflation rate dropped to 1.6 percent in December 2023 as a result of the Central Bank of Jordan raising interest rates in tandem with the US Federal Reserve's decisions, demonstrating its strong commitment to monetary stability. At the same time, the Jordanian banking system is still liquid, profitable, and well-capitalized.

Although there is a great deal of uncertainty due to the ongoing conflict in Gaza and regional tensions, Rooden pointed out that "the Jordanian economy will still be able to deal with these shocks well provided that the conflict does not escalate regionally." The war's continuation and the disruption of trade routes in the Red Sea may have an impact on the country's economy, particularly on sentiment, trade, and tourism.

This year, according to Rooden's predictions, growth would be 2.4 percent and the current account deficit would slightly increase to roughly 5 percent of GDP. If the war ends and its consequences subside, growth is predicted to rise to about 3 percent in 2025, and the current account deficit will reduce with continuing reform implementation.

He emphasized that, in line with the goals of economic modernization, the Jordanian government remains steadfastly committed to enacting sensible macroeconomic policies to preserve stability and structural reforms to raise the resilience of the country's economy and raise citizens' standards of living. The monetary policy of the Central Bank of Jordan will persist in its steadfast dedication to maintaining low levels of inflation and pegging the exchange rate of the Jordanian dinar to the US dollar.

Inflation in 2024 is predicted to stay relatively low, at about 2 percent. The Central Bank is prepared to alter its policies as needed to ensure the consistent preservation of financial and monetary stability.

He further stated that Jordan's authorities are working to improve the fiscal sustainability of public service companies by gradually and fairly reducing the fiscal deficit. The ultimate goal is to reduce public debt to less than 80 percent of GDP by 2028, all the while providing sufficient support for low-income families and creating space for increased capital spending.

According to Rooden, the objective is to bring the primary deficit of the central government down to 2.1 percent of GDP this year (not including grants and transfers to public sector businesses).

The efforts to improve the financial standing of public service companies are starting to pay off, as the combined primary deficit of the public sector is expected to drop to 4.1 percent of GDP by the end of 2024. This will result in a primary surplus of 1.3 percent of GDP for the general government (including grants) and a reduction of the public debt to slightly over 89 percent of GDP.

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