IMF mission, officials discuss reforms for 2016 and beyond

AMMAN – A mission from the International Monetary Fund (IMF), led by Martin Cerisola has recently, concluded a visit to Jordan, where it discussed with officials policies and reforms for 2016 and beyond, a fund statement said on Saturday. 

The statement, e-mailed to The Jordan Times, said the mission visited Amman in March 27 to April 4 to take stock of economic developments since the last IMF visit in November 2015, and to discuss with the authorities plans for economic policies and reforms that could be part of a fund-supported programme, the Extended Fund Facility (EFF).

Cerisola, who recently replaced Kristina Kostial as IMF chief mission to Jordan, said the discussions focused on how to continue striking the delicate balance between sustaining fiscal consolidation and debt sustainability, with the need to implement policies and reforms to support economic growth and promote employment in a difficult economic and regional context. 

The IMF and the government started late last year discussions over a new assistance programme to help the Kingdom implement medium-term structural reforms and to enable Jordan to benefit from the fundís financing tools. 

The EFF would focus on growth and job creation and improving the Kingdom’s business environment to be more attractive to investors, according to the statement. 

The EFF is another programme Jordan is seeking to implement with the IMF after concluding the three-year Stand-By Arrangement (SBA) in August last year, which gave the Kingdom access to around $2 billion.  

The IMF team and the authorities discussed the potential for policies and reforms in areas such as fiscal policy, debt management, energy, access to credit and the financial sector, as well as the business environment, he said, adding discussions also focused on the prospects for additional financing (including grants) from donors and international financial organisations under the Jordan Compact and Jordan Response Plan to the Syrian crisis on how such additional financing should fit within an overall macroeconomic framework that preserves debt sustainability.

Jordan Compact is a new holistic approach reached between Jordan and the international community to deal with the Syrian refugee crisis in February of this year. 

“Discussions are expected to continue during the Spring Meetings in Washington DC and the IMF team would expect to return to Amman in May to continue the discussions toward an agreement on macroeconomic policies and comprehensive structural reforms under a Fund-supported programme,” Cerisola said. 

The 2016 Spring Meetings of the International Monetary Fund and the World Bank Group are scheduled for April 15-17. 

Cerisola said the IMF team met with Prime Minister Abdullah Ensour, Minister of Finance Omar Malhas, Central Bank of Jordan Governor Ziad Fariz, Minister of Planning and International Planning Imad Fakhoury, and other senior government officials. 

The team also met with members of Parliament, with representatives of the banking and private sectors, and from the donor community, he said, adding that discussions focused on recent economic developments and government’s economic policy and reform agenda to sustain macroeconomic stability, boost economic growth and reduce unemployment.

Review of economic performance in 2015

The IMF mission chief said Jordan’s economy has continued to perform favourably despite the difficult regional environment as the conflicts in Iraq and Syria continue to impinge upon exports, tourism and overall economic performance. 

Real gross domestic product (GDP) growth reached 2.4 per cent in 2015, while inflation was -0.9 per cent, owing to a decline in food and fuel-related prices, with core inflation stabilising at 2 per cent.  The current account deficit (excluding grants) reached 11.7 per cent of GDP in 2015, reflecting continued weakness in exports and tourism. 

International reserves remain adequate. Despite low oil prices, some revenue slippages and one-off expenditures by end-year have brought the primary government deficit –– excluding grants and transfers to National Electric Power Company  (NEPCO) and Water Authority of Jordan (WAJ) –– to 5.2 per cent of GDP in 2015, up from 4.5 per cent of GDP in 2014. 

With NEPCO continuing to make steady progress towards operating balance, the combined deficit of the central government and NEPCO reached 6.1 per cent of GDP in 2015, above the 3.5 per cent of GDP deficit projected under the SBA, Jordan and the IMF concluded in August of last year. 

As a result, government gross and net public debt stood at 93.4 and 85.8 per cent of GDP at end-2015, respectively. For 2016, real GDP growth is expected at 2.5–3 per cent, supported by low oil prices and some rebound in confidence related to the implementation of policies under the Jordan Compact and Response Plan. 

There are some downside risks from the regional implications of lower oil prices on Jordan’s remittances and foreign investment, while the expected relaxation of EU rules of origin could boost exports, growth and employment ahead. Inflation is projected at 1–1.5 per cent, as fuel prices stabilise.