The IMF projected GDP growth to reach 2.1 per cent in 2020/Shutterstockby Kudakwashe Muzoriwa
Jordan has agreed on a new $1.3 billion Extended Fund Facility (EFF) programme with the International Monetary Fund (IMF) and will receive the first instalment of $140 million by the end of March 2019 to address a wide range of challenges facing the national economy, according to local newswire, Petra.
Mohammad Al Ississ, the Jordanian Finance Minister, said that Jordan will receive nine instalments of $140 million to $150 million over the four-year programme, adding that the allocations carry a three per cent interest rate.
In a report, the IMF said that it reached a staff-level agreement for the $1.3 billion programme that is subject to IMF management approval and consideration by the IMF Executive Board, which is expected in March 2020. It said the programme was aimed at bolstering economic growth and stimulating job creation.
The Washington based fund said that Jordan’s economic transformation agenda is supported by its five-year reform framework, which attracted significant support from the international community at the London Initiative in 2019.
The agreement on a new four-year programme is centred on increasing growth and stimulating job creation, strengthening external and fiscal stability, increasing transparency, and improving social spending.
Additionally, the IMF said that the structural reform agenda is designed to improve the investment climate and reduce costs to businesses, which will make it easier to create jobs while also protecting Jordan’s poor and most vulnerable.
The IMF projected GDP growth to reach 2.1 per cent in 2020 and to increase gradually in the coming years; reaching 3.3 per cent over the medium term and reinforced by the programme’s structural-reform timetable.
Similarly, inflation will remain subdued in 2020, at under one per cent year-on-year, but it is expected to to increase to 2.5 per cent over the next few years.
The fund said that external imbalances have narrowed—building on a significant improvement last year when the current account deficit decreased from seven per cent of GDP to 2.9 per cent. IMF expects the deficit to remain moderate over the medium term.
In December 2019, Al Ississ said that a new IMF deal to succeed a three-year extended fund facility that ended in March 2019 would secure lower servicing costs for the $42 billion in public debt that the country holds, which has spiralled in the last decade as a result of the spillover of regional conflicts on its economy.
Reuters reported that Jordan is now focusing on spurring growth by more public spending it hopes will revive consumer and business confidence. Economists warn that an expansive policy could derail fiscal stability and push higher debt which now stands at around 95 per cent.
The country's spiralling debt is at least in part due to successive governments adopting an expansionist fiscal policy characterised by job creation in the bloated public sector.