OREANDA-NEWS. End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.

A mission from the International Monetary Fund (IMF), led by Kristina Kostial, visited Amman from February 24-March 10 to conduct the sixth review of Jordan’s economic performance under the Stand-By Arrangement (SBA) approved in August 2012.

Ms. Kostial issued the following statement:

“In view of the Jordanian authorities’ commitment to economic reforms and efforts to preserve macroeconomic stability amid external challenges, the IMF team and the Jordanian authorities reached a staff-level agreement on policies that can lead to the completion of the sixth review under the SBA. The agreement is subject to the approval of the IMF Executive Board. The completion of this review would allow for the disbursement of SDR142.083 million (about US\$200 million).

“Jordan’s economy is withstanding a difficult regional environment—most notably, the conflicts in Syria and Iraq, and the resulting high cost of hosting refugees, disruptions to trade routes, and pressures on security spending. Growth has gradually increased to an estimated 3.1 percent in 2014, supported by construction, mining, and agriculture. Inflation dropped to 0.2 percent year-on-year in January, helped by lower global commodity prices. The current account deficit, excluding grants, narrowed to 12.1 percent of GDP in 2014 from 17.1 percent in 2013, despite disruptions to gas imports from Egypt and a decline in exports to Iraq.

“Program performance has stayed broadly on course. The central bank’s international reserves have continued to over-perform relative to program targets. The government budget has been well managed. Nonetheless, the fiscal deficit is estimated to have slightly exceeded the 2014 target owing to revenue shortfalls—the latter brought about by subdued activity in sectors that generate much of the tax revenue. The electricity company NEPCO incurred some additional losses because of shortfalls in gas flows from Egypt. There has been progress on the structural side: a preliminary license was granted to the first private sector credit bureau, and efforts are ongoing to bolster cross-border bank supervision and enhance the efficiency of public capital spending.

“Turning to 2015, Jordan’s economy will benefit from lower oil prices, including through reductions in the energy import bill and the current account deficit, which—excluding grants—is forecast to decline to 10.6 percent of GDP in 2015. Savings from oil consumption will boost domestic demand, helping to increase growth to close to 4 percent this year. The impact on the combined deficit of the central government and NEPCO will also be positive. This saving, together with a prudent 2015 budget, the recently approved income tax law, and other measures can help put public debt firmly on a downward path from 2016 onward. At the same time, international reserves are expected to stay at comfortable levels.

“Regarding the medium term, discussions focused on the need to persevere with Jordan’s program of reforms. Much has been achieved to date, and the decline in oil prices has given a welcome boost to Jordan’s adjustment efforts. Monetary policy will continue to preserve monetary stability and maintain the attractiveness of the dinar. Because Jordan’s public debt remains very high, there is a need to steadfastly adhere to the planned public sector adjustment, including continued deep tax reform and sustained implementation of the medium-term energy strategy.

“At the same time, a more ambitious structural agenda is needed to promote stronger growth and employment. Of particular importance are policy changes to: put unemployed youth into jobs by helping them acquire skills needed for the private sector; increase the participation of females in the labor force; re-examine public sector hiring and compensation; make Jordan more attractive to investment by improving the business environment; and strengthen public institutions, including through better tax administration and public financial management. Jordan’s 10-year framework of the economic and social policies ‘Vision 2025’, currently under discussion, could provide the framework for such reforms. It could also become a framework for continued donor support to not only help cover the cost of hosting the Syrian refugees but also increase capital spending so as to build the basis for high, sustained, and inclusive growth.”