Jordan Times
Monday, April 5, 2004
IMF commends Jordan's
'prudent macroeconomic policies and far-reaching structural reforms'
By Rami Abdelrahman
AMMAN — One day after raising the prices of oil
derivatives, the International Monetary Fund (IMF) commended the government for
being committed to "prudent macroeconomic policies and far-reaching structural
reforms"
In a statement on its website, the IMF announced Sunday the completion of the
second review of Jordan's performance under a two-year 85.28 million Special
Drawing Rights (SDRs) or (about $126 million, JD179 million) Standby
Arrangement.
The statement said those policies helped the Kingdom strengthen export growth,
lower inflation, raise investments and boost foreign currency reserves.
IMF's Acting Managing Director and Chair Anne Krueger was quoted in the
statement as saying: "The Jordanian economy, supported by generous financial
support from the international community, showed strong resilience in 2003,
despite the negative effects of the war in Iraq."
In completing the review, the IMF's executive board approved a waiver of
applicability of the end-March 2004 performance criteria.
"The fiscal adjustment in 2003 is commendable, particularly as it came against
the background of strong capital and security-related spending pressures
following the war in Iraq," Krueger said.
Going forward, she added, the Jordanian authorities are planning to sustain
their fiscal adjustment efforts, accelerate privatisation and utilise
privatisation proceeds solely for debt-reduction purposes, so as to meet the
debt ceilings mandated for 2006 under the Public Debt Law.
In addition to debt reduction purposes, privatisation proceeds currently finance
to a certain extent the Socio-Economic Transformation Plan.
In 2002, the country's public debt reached 98.6 per cent of gross domestic
product (GDP) which amounted to JD6.68 billion, while in 2003 it fell to 91.3
per cent of GDP despite an increase in public debt reaching JD6.71 billion.
Krueger said substantial export growth, the stronger reserve position, and the
positive balance of payments outlook suggest that the Jordanian economy remains
competitive, and that the fixed exchange rate regime has served Jordan well.
Admitting being unsuccessful in forcing small banks to merge, Central Bank of
Jordan (CBJ) Governor Umayya Touqan expressed in a lecture a few weeks ago
satisfaction about the IMF's feedback on the country's fiscal reforms. In
yesterday's statement, the IMF described the banking sector as "basically
sound."
It added that the regulatory and supervisory framework generally observes
international standards and codes in banking, payments systems, securities, and
insurance.
"But Jordanian authorities should effectively implement their new time-bound
corrective action framework to deal swiftly with the remaining few
undercapitalised banks," the IMF acting managing director said.
She also stressed the need for reforms related to the military and the civil
service pension systems, describing them as "essential steps toward fiscal
consolidation over the medium- and long- term."
The IMF welcomed the recently launched privatisation of the electricity sector
adding the improved economic outlook has enhanced the scope for accelerating the
privatisation programme.
"The authorities have demonstrated a strong commitment to prudent financial
policies and a solid record of policy implementation. Given the strength of the
external position, the authorities' intention not to make the purchase
associated with the completion of this review is appropriate, and consistent
with their intention to graduate from a series of IMF-supported programmes
following the completion of the current Standby Arrangement in July 2004,"
Krueger said.
Jordan joined the IMF on Aug. 29, 1952, and its current quota is SDR 170.5
million (about $227 million). Its outstanding use of IMF credit as of May 31
2002 is SDR 387 million (about $503 million).