The International Monetary Fund authorized a $335.2 million payment to Jordan, increasing the IMF’s total payment to the country since the beginning of 2020 to almost $1.23 billion.
The decision comes after the IMF’s executive board finished its third evaluation of Jordan’s four-year $1.5 billion loan package. Total payments include a $407 million purchase of special drawing rights under the quick financing program in May 2020, according to the Washington-based lender’s January 2022 country report.
IMF special drawing rights are an international reserve asset developed by the lender to bolster its member nations’ official reserves. They are composed of a basket of the world’s five major currencies: the US dollar, the euro, the Chinese yuan, the Japanese yen, and the British pound. SDRs are allocated to nations in accordance to their IMF quota shares.
SDRs from the IMF assist countries enhance their foreign reserves and minimize their reliance on more expensive domestic or external debt.
“The gradual reopening of the economy in 2021, supported by a strong immunization campaign and supporting policies, has aided the fledgling recovery. However, unemployment has remained high, particularly among young people and women “According to the IMF.
“The fund’s financial assistance will assist Jordan in navigating these issues and also catalyze cooperation from other development partners, which will be crucial in enabling Jordan to foster an inclusive recovery and move forward better, while continuing to host 1.3 million refugees.”
The monarchy, which has limited natural resources and over one million Syrian and Iraqi refugees, relies on external aid and grants to meet its fiscal and current account needs. The government is attempting to restructure its economy and reduce state subsidies since public debt and unemployment, which were already high before to the Covid-19 outbreak, skyrocketed.
Jordan’s economic recovery program is on track, according to the IMF, as continuing reform momentum has helped the country retain macroeconomic stability despite these difficult conditions. Fiscal objectives have been adjusted to allow for the expansion of social protection and employment retention programs, as well as key public investments.
Jordan’s economy is expected to increase 2.7% this year and 3.1% in 2023, up from 2% in 2021, as a nascent recovery takes hold, according to the IMF’s January report.
According to the analysis, the country’s current account deficit is predicted to rise to 9.7 percent of its GDP in 2021, up from 8.3 percent currently.
However, the current account deficit is expected to fall to around 4.7% of GDP in 2022, which is still more than twice the level in 2019, thanks to higher growth in export markets and a forecast rebound in tourism and remittances, according to the IMF.
According to the fund, despite the modest economic recovery, Jordan still confronts certain challenges.
The introduction of new Covid-19 versions may cause the anticipated comeback in tourism and the service industry to be delayed. According to the report, persistently high unemployment enhances the danger of extra “economic scarring,” especially considering the drop in labor force participation among young males.
The downside risks, however, are “somewhat reduced” by Jordan’s commitment to the IMF-backed program, extra donor help, and a robust banking system, according to the IMF. On the plus side, better regional ties may increase trade, remittances, and assistance inflows.
Near-term policy must strengthen the still-fragile economic recovery, reduce high unemployment, and promote private-sector-led development, all while maintaining debt sustainability.
The IMF program calls for gradual fiscal reduction beginning in 2022, as well as fundamental fiscal reforms to remove tax loopholes, safeguard jobs, assist the most disadvantaged people, and reduce fiscal risks.
According to the fund, proactive actions are required to maintain monetary stability and budgetary resiliency. Steps must be done to secure the financial viability of the electricity and water sectors while accounting for Jordan’s energy and water demands.
Continued structural changes are also required, according to the IMF, to promote job creation, competitiveness, and governance.