IMF and Jordan reach staff level agreement for $146m loan facility

The coronavirus pandemic has taken a toll on the country’s economy, the IMF says

The IMF on Wednesday said the coronavirus pandemic has taken a toll on the country’s economy. REUTERS/Yuri Gripas

The International Monetary Fund (IMF) completed a review of Jordan's economic reform programme, leading to a further $146 million being released under the lender's Extended Fund Facility.

This brings the total disbursements made to Jordan thus far in 2020 to $687m.

The IMF said the coronavirus pandemic has taken a toll on the country’s economy, despite efforts by the government to protect lives and livelihoods.

“Unemployment has surged, tourism and remittances have declined, and revenues of the central government and other public sector entities have dropped. Despite these difficult circumstances, the authorities showed policy discipline, including institutionalising the drive against tax evasion and strengthening tax administration; and maintained external market access,” the lender said.

Jordan's real gross domestic product rate is expected to contract by 3 per cent in 2020 and increase by 2.5 per cent in 2021, reflecting a gradual recovery as the pandemic abates, according to the lender.

The Jordanian dinar's peg to the US dollar, which has continued to serve the country's economy well, provides a credible anchor for monetary policy, the IMF said. International reserves are projected to remain adequate over 2020-21, at above 100 per cent of the IMF’s reserve adequacy metric.

“The banking system is healthy, and the authorities should remain vigilant to a possible increase in non-performing loans.”

Structural reforms, however, remain critical, “notably in the electricity sector, where pressures have increased in the aftermath of the pandemic.”

The authorities are also prioritising reforms aimed at facilitating female labour participation and youth employment, reducing the cost of doing business, ensuring an even playing field for firms and strengthening the anti-corruption framework to increase public trust.

“The Covid pandemic has significantly increased Jordan’s financing needs and robust financial support from multilateral and official bilateral lenders will be critical in the period ahead and may need to be stepped up in the event of a more protracted downturn," the IMF said.

The IMF entered into a three-year Extended Fund Facility agreement with Jordan in 2017, which was extended in March this year when the lender approved a four-year, $1.3 billion fund facility. On top of this, the IMF agreed to extend $396m in emergency assistance in April to help the country deal with the economic fallout from the Covid-19 pandemic.

The IMF is also proposing bringing forward into 2021 part of IMF credits that are due to be disbursed in the later years of the current assistance programme.

Total IMF disbursements, including the amount drawn under the Rapid Financing Instrument, over 2020-24 are expected to be about $1.7bn.

The kingdom was one of the first countries to close its airport in the Middle East and implemented a strict lockdown to prevent the spread of Covid-19. Jordan has registered 58,855 Covid-19 infections to date and 668 deaths, according to Worldometer, which tracks the pandemic. More than 7,508 people have also recovered from the infection.