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Jordan’s Policy Discussions Focus on Supporting Recovery, Debt Sustainability

Amman, Jordan - International Monetary Fund (IMF) Releases Latest Policy Discussions with Government of Jordan

The International Monetary Fund (IMF) has released its latest policy discussions with the Government of Jordan, focusing on near-term policies to support the country’s still-fragile recovery and address high unemployment.

Key Areas of Discussion

  • Implementing a gradual fiscal consolidation in 2022
  • Structural reforms to close tax loopholes, protect jobs, and mitigate fiscal risks
  • Preserving monetary and financial stability
  • Ensuring electricity and water sectors’ financial sustainability
  • Continuing structural reforms to strengthen job creation, competitiveness, and governance

Fiscal Program Progress

According to the IMF, Jordan’s fiscal program is on track, with key quantitative targets met. Domestic tax revenues led by income and sales taxes were ahead of expectations, while spending was in line with the supplementary budget.

Implementation of Fiscal Structural Benchmarks (SBs)

The authorities have made progress on implementing several SBs, including:

  • Issuing a circular setting out a timetable for eliminating central government domestic arrears
  • Adopting procedures to prevent new energy arrears

However, some SBs required more time to be implemented, such as the end-July SB on Goods and Services Tax “place-of-taxation” rules and the end-October SB on recruiting new division heads.

Support for Recovery and Debt Sustainability

To support the recovery and accommodate priority social and infrastructure spending, the IMF staff proposes a more gradual fiscal consolidation path that is consistent with debt sustainability. The government has submitted a draft budget for 2022 consistent with a JD 1,066 million (3.1 percent of GDP) primary central government deficit target, which implies a 0.7 percent of GDP fiscal target relaxation relative to the Second Review.

Revised Fiscal Targets

The revised fiscal targets will allow the authorities to support a higher level of aggregate demand in the economy, reduce unemployment, and accommodate key job-support and social protection schemes, while still implying a significant year-over-year primary balance improvement.