Jordan economic reform is on right path; 2.7% GDP growth envisaged — IMF

1. Ississ
(File photo: Ameer Khalifeh/Jordan News)
AMMAN — An International Monetary Fund (IMF) team reached an expert-level agreement with the Jordanian government on the fifth review of the performance of the Kingdom’s economic reform program, the IMF said in a statement, Al-Mamlaka TV reported.اضافة اعلان

The IMF team is headed by its Advisor in the Middle East and Central Asia Department Ali Abbas.

The IMF said in a statement that the reforms are planned and implemented by the Jordanian government, and supported by the “Extended Fund Facility” agreement with the IMF, which lauded Jordan for exhibiting a “strong commitment to continue implementing the economic reform program”.

The IMF said that the Kingdom’s economic recovery in the wake of the COVID-19 is “gaining increased momentum”.

Following the review, the IMF envisages real GDP growth to reach 2.7 percent in 2022, up from the 2.4 percent recorded during the fourth review a year earlier.

The IMF asserted the need for the fiscal and monetary policy to continue in order to enhance macroeconomic stability, while supporting vulnerable groups in the face of a challenging external environment as a result of high commodity prices, and tight global financial markets.

The IMF affirmed the Jordanian government’s commitment to implementing structural reforms to achieve strong and inclusive growth for all segments of society.

It said that includes improving labor productivity, enhancing competitiveness, addressing the structural deficit in the electricity sector, and the severe water scarcity, and meeting the requirements for adapting to climate change.

Abbas said on Tuesday that the “prudence” of fiscal and monetary policies helped maintain macroeconomic stability in the Kingdom, and allowed it to access international markets, despite the turmoil in global economic conditions.

Abbas expected that the government will reduce the level of the primary deficit, excluding grants, by 0.7 percent of GDP to reach 3.7 percent of GDP in 2022.

The cost of subsidizing fuel and food will be compensated by rationalizing spending on items that do not represent a priority for Jordanians, or through improved revenue collection, such as curbing tax evasion, according to the IMF. It praised the institutional and legislative efforts made by the government to address tax avoidance.

Abbas said that the Central Bank of Jordan raised interest rates in line with the US Federal Reserve’s increase in the basic interest rate for the purpose of maintaining the Jordanian dinar’s exchange rate linked to the dollar, while keeping the balance of foreign reserves at appropriate levels.

The IMF pointed to major financial challenges facing the electricity sector, in “light of the obstacles imposed by the rise in global oil and gas prices”.

The deficit of the National Electric Power Company (NEPCO) increased in 2022, partly due to reductions in the Bulk Supply Tariff paid by the electricity distribution companies, although long-term contracts to import gas for electricity generation mitigated the impact of the sharp rise in gas prices, according to IMF.

“With the entry into force of the agreement to purchase electricity generated from oil shale, the financial balance of the NEPCO will come under greater pressure next year,” the IMF statement said.

The IMF said that Jordan is preparing an action plan to decisively address the financial challenges facing NEPCO, in cooperation with unspecified development partners.

The Ministry of Finance said in its financial bulletin for September that the debt of NEPCO and the Jordan Water Authority amounts to about JD7.7 billion.

With regard to the water sector, the Cabinet’s approval of a roadmap for the financial sustainability of this sector represents an “important step” towards addressing water scarcity, while containing the deficits that the sector suffers from, and the payment of financial arrears.

Finance Minister Mohamed Al-Ississ said on Tuesday that Jordan’s program with the IMF is a “national program with distinction, based on national goals set by the government to raise the competitiveness of the economy” with the aim of creating jobs, raising the level of transparency, and improving financial accountability and the level of government services.

The minister explained during a press conference that the IMF-supervised program seeks to “strengthen the social protection network and maintain financial and monetary stability, something that many countries have lost in light of the difficult economic conditions that the world is going through, from recession accompanied by inflation during the COVID-19 pandemic, and the Russian-Ukraine crisis.”

He attested that “Jordan has maintained financial and monetary stability.”

Read more Business
Jordan News