Jordan’s economy continues to recover on fiscal measures and rapid vaccination programme

Jordan's economy continues to recover from the impact of the coronavirus pandemic on the back of fiscal and monetary measures, as well as an accelerated vaccination programme, according to the International Monetary Fund.

The country’s economy is set to grow 2 per cent in 2021 and 2.7 per cent next year, the IMF said, after reaching a staff-level agreement on the third review of Jordan’s economic reform programme under its Extended Fund Facility arrangement.

“Despite the challenging circumstances brought on by the pandemic, sound policies have helped maintain macroeconomic stability,” the IMF said.

“The government is on track to narrow its fiscal deficit by 1 per cent of GDP in 2021, reflecting robust revenue collection on the back of a significant institutional effort to tackle tax evasion and improve tax compliance.”

Robust monetary policy and external financing also helped the country to maintain reserves at a “comfortable level,” it said.

The kingdom, which relies on foreign aid and grants to finance its fiscal and current account needs, is trying to overhaul its economy and cut state subsidies as public debt and unemployment rises. It is also looking to boost oil production and expand its non-oil economy.

“Jordan’s standing in international markets remains strong with spreads low compared to peers in the region,” the Washington based lender, said.

As of Friday, Jordan had administered 7.72 million doses, covering more than 76 per cent of its total population, according to Bloomberg's vaccine tracker.

Challenges, however, remain for the country due to the high unemployment rate, the IMF, said.

The country’s current account deficit is expected to increase to around 9.5 per cent of GDP in 2021 due to higher fuel import prices and increased intermediate imports, but is expected to decline to less than 5 per cent in 2022.

Jordan’s banking system remains “well-capitalised and liquid” and non-performing loans remained at low levels in the first half of 2021, according to the IMF.

The country also made significant progress to enhance the regime for anti-money laundering and combatting terrorism financing, including enacting a new AML/CFT law to better align with FATF (Financial Action Task Force) standards.

The FATF is an intergovernmental organisation developed by the Group of Seven countries to combat money laundering around the world.

Jordan hosts 1.3 million Syrian refugees and “robust concessional support from donors “remains crucial,” it said.

Total IMF disbursements, including the amount drawn under the Rapid Financing Instrument, over 2020-24 are expected to amount to $1.95 billion. This is in addition to $469 million disbursed to Jordan in August under the IMF’s General SDR (Special Drawing Rights) allocation.