Jordan, IMF reach tentative agreement on loan deal

AMMAN — The International Monetary Fund (IMF) mission to Jordan has completed its sixth review under the Stand-By Arrangement (SBA), which is expected to allow the Kingdom to receive $200 million in the coming weeks. 

A statement issued by the IMF on Thursday said a team from the international financial organisation and the Jordanian authorities reached a staff-level agreement on policies that can lead to the completion of the sixth review under the SBA, adding that the agreement is subject to the approval of the IMF Executive Board. 

The completion of this review would allow for the disbursement of about $200 million, the statement quoted the IMF mission director, Kristina Kostial, as saying.

“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,” Kostial said, adding growth has gradually increased to an estimated 3.1 per cent in 2014, supported by construction, mining and agriculture while inflation dropped to 0.2 per cent year-on-year in January, helped by lower global commodity prices. 

On the economic and financial reform programme sponsored by the IMF, she said the performance of the programme has stayed broadly on course as the central bank’s international reserves have continued to over-perform relative to programme targets and the government budget has been well managed. 

But Kostial said the fiscal deficit is estimated to have slightly exceeded the 2014 target owing to revenue shortfalls due to subdued activity in sectors that generate much of the tax revenue. 

On expectations for 2015, the IMF official said that Jordan’s economy would 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 per cent of GDP in 2015. 

Savings from oil consumption will boost domestic demand, helping to increase growth to close to 4 per cent this year, she added, pointing out that the impact on the combined deficit of the central government and the state-owned electricity company (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 onwards, Kostial noted, indicating that international reserves are expected to stay at comfortable levels.

“Regarding the medium term, discussions focused on the need to persevere with Jordan’s programme 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,” she said. 

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, according to Kostial.