Jordan makes 'strong progress' on economic reforms despite Covid-19 headwinds, IMF says

The International Monetary Fund is committed to helping the kingdom contain the Covid-19's impact and build a more resilient economy

Jordan, like many nations is seeing a second surge in coronavirus cases. Unsplash

Jordan responded “quickly and decisively” to support its economy despite significant challenges posed by the Covid-19 pandemic and the kingdom continues to make progress on its economic and fiscal reform agenda, the International Monetary Fund's managing director said.

The Washington-based lender is committed to helping Jordanian authorities contain the economic and financial impact of the pandemic and build a stronger and more resilient economy, Kristalina Georgieva said in a statement on Monday to mark the kingdom's centenary.

“Timely and targeted fiscal measures have helped protect jobs and the vulnerable, while equitable tax reforms – aimed at tackling evasion, closing loopholes, and broadening the tax base – have helped maintain debt sustainability,” Ms Georgieva said.

“At the same time, a sizable monetary stimulus has supported the recovery, while financial stability and adequate reserve buffers have been preserved.”

Ms Georgieva said she has held a “very constructive discussion” with Jordan’s Finance Minister Mohamad Al Ississ and the kingdom’s central bank governor Ziad Fariz on "the strong reform progress made under the IMF-supported programme".

However, Jordan needs to address high unemployment – especially among the country’s youth and women – reform its electricity sector, boost business competitiveness and strengthen governance to deliver “durable, jobs-rich and inclusive growth”.

Jordan, which relies on foreign aid and grants to finance its fiscal and current account needs, is trying to overhaul its economy and cut state subsidies as public debt and unemployment are on the rise.

The kingdom is also looking to boost oil production and expand its non-oil economy, however, a large number of Syrian refugees and outbreak of Covid-19 have deepened its economic and fiscal woes.

Jordan’s debt-to-gross domestic product ratio widened to 109 per cent last year from 97.4 per cent in 2019, according to World Bank data. Unemployment hit a high of 25 per cent in the fourth quarter of 2020, with youth unemployment rising to 55 per cent, according to the IMF.

The recovery of tourism sector, a key source of foreign exchange, and some of the other contact intensive sectors has also slowed with delays in the kingdom's vaccination programme.

However, fiscal as well as monetary easing and the liquidity provided to the private sector have provided a floor to the economy, Jihad Azour, head of the IMF's Middle East and Central Asia department, told The National, earlier this week.

"What is needed going forward is that the fiscal strategy will remain anchored, an equitable tax reform that helps close loopholes, but also to maintain reforms that are introduced in order to reduce the cost of energy, reduce the cost of labour and allow the economy to become more competitive," Mr Azour said.

The fund is supporting the reform progamme of Jordan and it is on track, but  "only by accelerating structural reforms [can] Jordan’s economy recover faster," he added.

Last month, the IMF increased the size of Jordan's existing loan facility by $200 million to help the country deal with “higher-than-expected Covid-related spending”.

The total amount disbursed to the kingdom, including the two-year Extended Fund Facility and money provided under the Covid-19 emergency loan programme, is about $1.95 billion for the 2020-2024 period.

With the IMF-backed programme and progress on reform agenda, Jordan’s economy is expected to grow by 2 per cent this year after contracting 2 per cent in 2020, according to the fund.

Jordan, which is hosting 1.3 million Syrian refugees, will still need “robust, timely and scaled-up donor assistance” to help it protect the lives and livelihoods of its citizens and refugees, Ms Georgieva said.