The Executive Board of the International Monetary Fund (IMF) today completed the second review of Jordan’s performance under a three-year program supported by a Stand-By Arrangement (SBA). The completion of the review enables an immediate disbursement of SDR 170.5 million (about US$260.8 million), bringing total disbursements to SDR 682 (about US$1.043 billion). The 36-month SBA in the amount of SDR 1.364 billion (about US$2.086 billion, or 800 percent of Jordan’s quota at the IMF) was approved by the Executive Board on August 3, 2012 (See Press Release No. 12/275). The first review under the SBA was completed on April 10, 2013. (See Press Release No. 13/113).

In completing the second review, the Executive Board approved the authorities’ request for waivers of non-observance of end-September 2013 performance criteria on the primary fiscal deficit of the central government and on losses of National Electric power Company (NEPCO).

Following the Executive Board’s discussion on Jordan, Ms. Nemat Shafik, Deputy Managing Director and Acting Chair, said:

“Regional instability continues to weigh on Jordan. The conflict in Syria and shortfalls in gas flows from Egypt are putting pressure on the fiscal and external accounts. The sizable influx of Syrian refugees is also straining labor and housing markets as well as the provision of public services. Nonetheless, growth is slowly recovering, inflation is contained, and the external current account deficit is narrowing. Underpinned by sound policies, performance under the Fund-supported program has been broadly on track. The central bank has rebuilt reserves, which are now at a comfortable level.

“Fiscal consolidation will continue to place debt on a downward path, but has been slowed down compared to the original program to help cushion the impact of lower Egyptian gas supplies and the Syria crisis. The authorities’ plans for better targeting the fuel and food subsidies and completing the income tax reform initiative would not only improve the fiscal position, but also would foster equity, a key objective under the program. Looking ahead, it remains critical to further improve tax administration and public financial management.

“Implementing the authorities’ medium-term energy strategy is key to returning the electricity company to cost recovery. In this regard, the recent tariff reform, which protects households, is a bold and welcome step. Looking forward, success will hinge on implementing the announced path of equitable tariff increases and bringing on stream alternative energy sources, in particular the Liquefied Natural Gas terminal in Aqaba, while improving energy efficiency.

“The central bank’s focus on maintaining comfortable levels of foreign exchange reserves remains warranted. The recent successful issuance of a $1.25 billion U.S.-guaranteed Eurobond is welcome. Looking forward, the central bank should consider further cuts to interest rates only if there is clear evidence that core inflation is on a downward path.

“Ongoing public investment should support growth. Nonetheless, accelerated implementation of structural reforms is needed to put a meaningful dent in persistently high unemployment and boosting potential growth. Securing additional grants could help alleviate fiscal and macroeconomic pressures, including from the Syria conflict and further disruption in gas supplies from Egypt, while also stimulating employment and strengthening growth.”