Best Practices for Financial Compliance in Jordan: A Call to Action

A recent report by the International Monetary Fund (IMF) has highlighted the importance of fiscal transparency in Jordan, a critical element in effective fiscal policymaking and the management of fiscal risks. The report evaluated Jordan’s financial practices against best practices, identifying several areas where further progress can be made.

Fiscal Transparency: A Critical Element

The report noted that while Jordan has made some improvements in fiscal transparency over the past decade, there are still significant gaps in the country’s reporting practices. For example:

There is no comprehensive and consolidated view of public sector finances, with various reports published but fragmented and based on different standards and institutional coverage.
Fiscal reports cover only 88 percent of general government activity in terms of flows, leaving major gaps in the coverage of government stock positions of assets and liabilities.
Limited information is published on tax expenditure, which represents 10 percent of GDP and two-thirds of tax revenue.

Optimism Bias and Fiscal Risks

The report also highlighted significant optimism bias in macroeconomic forecasts, resulting in large errors in revenue projections that underpin the budget. Additionally:

There is no analysis in the budget of how fiscal outcomes might be affected by different macroeconomic scenarios.
Jordan’s government faces additional fiscal risks from long-term pressures on health and pensions spending, which represent 127 percent of GDP.
However, there is no publicly disclosed analysis of the long-term sustainability of public finances.

Policy Actions to Strengthen Fiscal Transparency

The report proposes several short- and medium-term policy actions to strengthen fiscal transparency, including:

Publishing more information on the budget, fiscal forecasts, PPPs, and tax expenditures
Building up the Ministry of Finance’s Macro-Fiscal Department
Implementing many of the report’s recommendations

Key Findings

The report provides a comprehensive view of Jordan’s public sector financial position, estimating:

Consolidated public sector expenditure of 48 percent of GDP
Public sector asset holdings and liabilities of around 152 and 159 percent of GDP respectively
Public sector net worth of minus 6 percent of GDP in 2019

A Call to Action

The findings of this report serve as a call to action for the government of Jordan to prioritize fiscal transparency and accountability, ensuring that citizens have access to reliable and comprehensive information about their country’s financial situation.