São Paulo – This Wednesday (25th), the International Monetary Fund (IMF) announced an agreement with the Jordanian government which may lead to US$ 2 billion worth of loans to support the country’s reform program. The loan is still pending approval from the IMF executive board.
According to a press statement issued by the IMF, important external factors have shaken the Jordanian economy, such as repeated interruptions in natural gas supply from Egypt, which forced the government to import fuel products at high prices to generate power. Regional tension and the world economic slowdown have affected tourism, workers’ wages, and foreign direct investment, hindering the country’s growth.
“Despite the increase in tourism revenues and wages in 2012, alongside the projection of decline in oil prices, the current account deficit is expected to be at 14% of the Gross Domestic Product (GDP) in 2012,” according to the head of the IMF mission to Jordan, Kristina Kostial, in a press statement.
According to Kostial, in 2011 Jordan adopted fiscal and energy policies which cushioned the impact of economic problems on the population, such as energy bill subsidies, but these policies led to an increase in government deficit, and in operating losses of the government-owned power utility Nepco. In 2012, she adds, the need to provide housing and medical services to Syrian refugees has increased Jordan’s financial issues.
“The large financing needs of the central government and NEPCO have lowered the financing available to support adequate private-sector investment and added to the already high public debt,” said Kostial.
“To avoid sharp adjustments that could adversely affect growth and the vulnerable parts of the population and to guard against additional shocks, the Jordanian government asked for financial assistance from the IMF. The IMF staff agreed to support Jordan’s agenda for a socially acceptable fiscal consolidation. It will provide liquidity during the next three years, which will allow the authorities to gradually implement their agenda,” according to the executive.
According to Kostial, the main goals of the government’s reform agenda are to correct fiscal and external imbalances, and foster high and inclusive growth. For such, she says, Jordanian authorities plan on making short- and medium-term fiscal adjustments, backed by expenditure and spending reforms; comprehensive reforms in the electricity sector to bring NEPCO back to cost recovery; and structural reforms aimed at improving the business environment, enhancing transparency, and fostering trade.
*Translated by Gabriel Pomerancblum
