Jordan has signed a new agreement for economic and structural reform with the International Monetary Fund (IMF) for a duration of four years, with a total value of $1.2 billion. It is expected to come into effect after the current agreement expires in March 2024. This agreement is anticipated to have significant implications for the Jordanian economy.
It is evident that the decision to turn to the IMF once again is influenced by several factors, including the domestic economic situation, regional and international developments. From the government’s perspective, this decision is strategic and reflects its preferences and appreciation of the best economic policies under the current circumstances.
As revealed in the press release issued by the IMF on November 9, 2023, the new programme will continue to support Jordan in facing new shocks, with a focus on maintaining fiscal discipline to place public debt on a sustainable trajectory while preserving financial and monetary stability and accelerating the pace of structural reforms to support growth and create employment opportunities.
Therefore, we expect this agreement to help in more effectively managing the debt file, which may include measures to reduce the budget deficit and implement financial reforms, ultimately leading to a more sustainable debt path.
We also anticipate that the agreement with the IMF will include measures to promote economic growth through the adoption of structural reforms and substantial investments in key sectors of the economy. Among other policies, improving the business environment and infrastructure is expected to enhance sustainable economic growth.
The provision of support through a new Extended Fund Facility (EFF) programme often reassures international investors and donors. It is assumed that the agreement will attract foreign direct investment by increasing the stability of the Jordanian economy and improving the overall investment climate, leading to increased employment opportunities and diversification of the country’s economy.
The IMF programme focuses on economic and structural reforms, with the aim of establishing a more dynamic private sector capable of creating more employment opportunities and achieving a tangible reduction in unemployment, particularly among women and youth.
We assume that the IMF agreement will continue to provide social safety nets and targeted assistance programs that can help protect the most vulnerable populations during economic reforms. This is crucial to mitigate the negative impacts of structural adjustments on the poorest segments of society.
The agreement may aim to stabilise the exchange rate, which can maintain low levels of inflation and enhance overall economic stability. A stable currency can attract investment and support business growth. One of the strongest pillars of the Jordanian economy is its robust monetary aspect, with substantial foreign reserves and exchange rate stability and a resilient banking system. However, it needs to provide self-originated financial tools created from the deposits of depositors to provide financing for all economic sectors, especially those contributing to economic growth and creating new job opportunities.
Furthermore, the IMF agreement can increase the country’s access to international financial markets and help secure additional financing from various sources to support public investment and other development projects. On the other hand, providing the agreement with new loans will increase the overall public debt burden. Therefore, it is essential to ensure that the spending aspects of these loans are on developmental projects that contribute to increasing the GDP and creating sustainable employment opportunities.
It is essential to note that the success of this agreement largely depends on its implementation and the specific conditions and policies it contains. Economic reforms and austerity measures may present short-term challenges for the population, but if well-designed and effectively managed, they can lead to economic stability and long-term prosperity.
The actual impact of the new programme on debt, growth, foreign direct investment, employment, and other factors will depend on the details of the agreement and how the Jordanian government implements the reforms and policies agreed upon. The government and the IMF will monitor the progress made by the country under the programme, and may adjust the terms to ensure the achievement of the objectives. It is also crucial for the government to maintain communication with the public and engage them in building support for the reforms and explaining their long-term benefits.