King’s call for dialogue very positive step forward — IMF

AMMAN — The International Monetary Fund (IMF) said on Thursday it was following closely the situation in Jordan and the government’s efforts to tackle the country’s difficult economic challenges, welcoming His Majesty King Abdullah’s recent call for a national dialogue as a very positive step forward. 

IMF teams have recently visited Amman and held “productive” discussions with the authorities, the fund said.

"Significant progress was made towards recommending to our executive board the completion of the second review of the IMF-supported programme," Gerry Rice, director of the IMF Communications Department, said in a statement e-mailed to The Jordan Times.

“This would make available to Jordan around $70 million, additional to the almost $1.2 billion already provided since 2012,” Rice said Thursday.

Jordan and the IMF signed a three-year extended arrangement under the Extended Fund Facility for Jordan for an amount of about $723 million to support the country’s economic and financial reform programme. 

Asked at a press conference in the US whether the IMF is blamed for placing Jordan under pressure, he said: “It is important to recognise that member countries commonly come to the IMF for support because their balance of payments becomes unsustainable. The policies we support under a programme are tailoured to each country’s specific circumstances to put their finances back on a sustainable path.”

“Now, in the case of Jordan, the country is facing extraordinary pressure due to a combination of factors, some — but not all — of which are beyond the authorities’ control, including the hosting of Syrian refugees…. In this context, the Jordanian authorities have asked the IMF for support and to work with them to preserve macroeconomic stability and advance reforms to promote growth and employment, which in turn can help ensure social and political stability,” Rice said, according to the transcript of the press conference obtained by The Jordan Times.

“With high public debt, low tax revenues, falling external budget grants, and large social and infrastructure needs, Jordan’s public finances need to remain underpinned by broadening the tax base so the burden is broadly shared, including by removing large tax exemptions on income and sales taxes. The focus ahead should be centred on taxing income, particularly those with greater capacity to pay, rather than consumption taxes, which tend to adversely impact relatively more the poor,” Rice said.

However, these efforts need to be complemented by reforms that enhance the business environment and reduce the cost of formal jobs, particularly for youth and women, Rice added.

Rice said the ongoing IMF-supported programme in Jordan is aimed at underpinning the government’s economic priorities, adding that authorities and the IMF team reviewed the policies and planned reforms needed to further strengthen Jordan’s inclusive growth agenda, which not only focuses on the need to preserve a gradual and steady fiscal consolidation to stabilise and reduce public debt, but also on how to stimulate employment, investment and enhance the competitiveness of the private sector.

There is also a genuine concern for the social dimension, Rice said.

“For this, it is critical that the benefits and costs of reforms are balanced and distributed across all sectors of the economy, with a greater focus on those with the capacity to pay, while also protecting the most vulnerable,” Rice added.

Meanwhile, he said that the conduct of monetary policy by the Central Bank of Jordan (CBJ) remains appropriate and well-focused on maintaining an adequate level of reserves to support the Jordanian dinar peg, while also helping to provide supportive credit conditions to the economy. 

Looking ahead, he said, his staff is reassured by the authorities’ commitment to respond as needed to domestic, regional, and global monetary conditions, while preserving an adequate level of reserves. The authorities intend to keep gross usable reserves at about 7 months of projected imports, by the end of 2018.

The fund official added that recent events also confirm the critical importance of bold reforms to address high unemployment, particularly among youth and women, and to stimulate economic growth in a way that does not jeopardise Jordan’s hard-won macroeconomic stability. 

“In this context, our discussions included tax reforms aimed at securing resources to meet urgent spending needs — including on security, health, and education — while ensuring a fair sharing of the burden of adjustment,” Rice said. 

“Recent events also underscore the need for the international community, including regional donors, to shoulder more of the burdens of Jordan’s hosting over a million Syrian refugees and providing security in the region, all of which have placed extraordinary strains on its public finances. That is why the IMF has repeatedly urged the international community to help Jordan with much-needed increased financial support, preferably in the form of grants,” he added.

Rice stressed on the IMF’s commitment to supporting Jordan and its people. 

“We look forward to continuing our discussions with the new government with a view to presenting the second review of Jordan’s economic reform programme to our executive board as soon as possible,” he said.

Over the past few days, thousands of Jordanians took to the streets in protest of the bill, which was rejected by various segments of the society.

The bill, which is part of reforms under a programme brokered with the IMF, focuses on three aspects: improving tax collection, curbing tax evasion and boosting tax revenues, which are expected to increase by JD300 million annually. The proposed law seeks to increase the number of income tax payers from 5 per cent to 10 per cent.

Under the EFF deal with the IMF, the government agreed on six conditions that aim at reducing public debt to safe levels and stimulating the economy.