São Paulo – The International Monetary Fund (IMF) reported this Wednesday (5th) that for the first time a financial support program to an Arab nation in transition was successfully completed. In August 2012, the IMF and Jordan signed an arrangement that pushed for the adoption of economic measures by the country and quarterly loans by the Fund, in a total of US$ 2.05 billion. The program reached its end this Friday (31st) with the last disbursement of US$ 400 million. After reaching stability, Jordan has a new challenge: reduce unemployment, which now stands at 13%.
Although the IMF includes Jordan among nations in transition due to the Arab Spring, demonstrations in the country didn’t result in the fall of the government, as occurred in Egypt, Tunisia and Libya. But Jordan was forced to adopt measures to meet popular demands.
The IMF said in a press release that the agreement with Jordan was successful even with several regional problems. “During the course of the program, Jordan was hit by further shocks, the worst being the Syrian refugee crisis. Jordan has received a huge flow of refugees – the authorities estimate that there are more than one million refugees, or about 20 percent of Jordan’s population”, said the head of the program at the IMF, Kristina Kostial, in an interview done with the Fund itself and released this Wednesday.
Some of the reasons that brought Jordan to need financial support were caused by the Arab Spring. In 2011, the country imported gas from Egypt on a below-the-market price to produce electric power. Sabotages in the pipelines, however, forced Jordan to search for other suppliers, which elevated the price of gas. In the same year, the government increased public spending through higher subsidies and wages. These measures increased the government’s fiscal deficit and it spent their international reserves.
The IMF executive said that the support program to Jordan had three objectives: maintain macroeconomic stability, ensure fairer, more equitable policies for the population through a reduction of subsidies and the adoption of a more efficient tax system, and increase growth prospects for the economy.
In Kostial’s assessment, the biggest success of the program was achieved in maintaining macroeconomic stability. This success was achieved with reforms in the energy sector and in the government and resulted in the reduction of the public sector deficit. Meanwhile, the adoption of fairer policies had “mixed” success since the government, although eliminated subsidies on fuel, made “limited reforms” to expand income taxes.
The third objective, which was to increase the country’s growth potential, is a more difficult task due to regional instabilities. Even so, the government approved laws for the adoption of public-private partnerships and to attract new investments. The country is growing, on average, 3% in the last few years.
The executive said that the Arab country has a debt that amount to 90% of its Gross Domestic Product (GDP) and that financing needs are still going to be high for the next couple years. The report says that there’s space for the widening of the income tax base and to balance the accounts of the state-owned company, besides generating more jobs.
*Translated by Sérgio Kakitani
