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‘NEPCO reform, reducing employment costs must be priority for Jordan’

IMF mission chief says Jordan on right track, cites improvement indications

By Mohammad Ghazal - May 16,2019 - Last updated at May 16,2019

AMMAN — Combating tax evasion, reforming the National Electric Power Company (NEPCO) and reducing the cost of hiring Jordanians in the formal economy are priority reforms that Jordan needs to advance, IMF Mission Chief Martin Cerisola said on 

Tuesday.

The IMF official, who said the completion of the second review is an indication that Jordan is on the right track, stressed that Jordan has continued to maintain stability against a very difficult economic environment and complex socio-political challenges.

There have been some signs of improvement in the economy with the reopening of the borders with Iraq and exports to the Iraqi and Gulf markets picking up. 

However, the “situation will remain difficult and this is why we have been encouraging the government to really try to advance these reforms that will help in improving conditions”, he said in an interview with The Jordan Times late on Tuesday.

“There is a need to put the company [NEPCO] in a better financial condition, which would lower the high tariff rate that large corporations are facing,” he noted, adding that a roadmap has been prepared with the help of the World Bank and in consultation with the IMF to reform the power company.

He stressed that the costs of employing Jordanians in the formal economy is currently high and in need of urgent reform.

“The effective implementation of these reforms and the enforcement of the Income Tax Law will help achieve the desired goals… There is also a need to continue looking into tax incentives, especially in the development and free economic zones, which are important to help tackle the still-high deficit,” he added.

On the outlook for the economy, he said growth is expected at 2.2 per cent in 2019, accelerating to 2.4 per cent in 2020.

“All this hinges on the external environment improving and also on the fact that the government has been able to pass through Parliament important legislation like the secure lending law, the bankruptcy law and the business inspection law. We believe this legislation should also help the business environment. We hope that the implementation of NECPO’s reform roadmap will also help improve the conditions facing the business sector,” he said.

However, there is a lot of global and regional uncertainty, and while Jordan’s economy has remained broadly stable, low growth and insufficient job creation remain a challenge, the IMF official said.

He added that the IMF agreed on a seven-month extension of the $700-million Extended Fund Facility, noting that during this period, the IMF will engage with the new government to start a new programme.

“The idea is to extend this programme so we can have discussions… within the context of the framework that this current programme provides, so that donors, the international capital market and the international community remain reassured… that there is an IMF programme supporting the authority,” he said.

Regarding the UK-hosted London initiative, that took place in late February, he said it was a success in terms of the international community coming together to support Jordan. 

The support that was obtained through the conference, not only in terms of investments but also in terms of Jordan’s financing needs, has been quite significant and has helped address most of the financing needs through the end of 2020, Cerisola said.

The international community expressed their commitment at the event to continue supporting Jordan going forward, so the financing needs that will be needed after 2020 will be discussed again and the international community will reevaluate the conditions to see what Jordan needs, he added.

“This year is a critical year for Jordan to avoid a repeat of last year and it is important that focus remains on reducing fiscal deficit and that the government really advances some reforms to reduce energy costs for large corporations and also lower the cost of formal jobs because this is very important for improving the conditions of investments and the population... The task to boost growth needs to be focused on advancing these reforms rather than providing more tax incentives,” Cerisola stressed.

He highlighted that the IMF has not only been helping advance reforms but also asking for the donor community to provide support to the country.

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