Jordan agrees $1.3bn IMF programme – Petra

Jordan has agreed a new $1.3bn programme with the International Monetary Fund (IMF) and will receive a first instalment of $140m by the end of March, the state news agency Petra said on Thursday.

Jordan will receive nine instalments of $140m to $150m over the four-year programme, Petra said on its Twitter account. It cited Jordan’s finance minister, Mohamad al-Ississ, as saying the allocations carry a 3 percent interest rate.

In Washington, the IMF said it reached a staff-level agreement for the $1.3bn programme that is subject to IMF management approval and consideration by the IMF Executive Board, which is expected in March. It said the programme was aimed at bolstering economic growth and stimulating job creation.

In December, al-Ississ said a new IMF deal to succeed a three-year extended fund facility that ends in March would secure lower servicing costs for the $42bn in public debt that the country holds, which has spiralled in the last decade as a result of the spillover of regional conflicts on its economy.

The programme will focus on efforts to spur sluggish growth that has hovered at around 2 percent in the last decade. Petra on Thursday said the IMF forecast Jordanian economic growth of 2.1 percent in 2020.

The agency cited the IMF as saying there would be no tax increases or increase in water prices under the new programme while electricity prices would be reduced for the business sector to increase competitiveness.

The IMF statement issued in Washington said Jordan’s structural reform agenda was “designed to improve the investment climate and reduce costs to businesses, which will make it easier to create jobs while also protecting Jordan’s poor and most vulnerable.”

IMF-backed austerity measures in 2018, including steep tax increases, dampened domestic consumption, dealt a blow to investor sentiment and triggered some of the largest protests in years that brought down the previous government.

Jordan is now focusing on spurring growth by more public spending it hopes will revive consumer and business confidence. Economists warn that an expansive policy could derail fiscal stability and push higher debt which now stands at around 95 percent.

The country’s spiralling debt is at least in part due to successive governments adopting an expansionist fiscal policy characterized by job creation in the bloated public sector.

Past governments also increased spending on welfare and public sector pay in a move to ensure stability in the aftermath of the Arab Spring protests in the region in 2011.