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Jordan: Sixth Review Under the Stand-By Arrangement, Request for Waivers of Applicability of Performance Criteria, and Rephasing of Access-Staff Report; Press Release; and Statement by the Executive Director for Jordan
Summary:EXECUTIVE SUMMARY Jordan is persevering in a difficult regional environment. The conflicts in Syria and Iraq are resulting in disruptions to trade routes, less tourism, a hesitant investment sentiment, high costs to accommodate refugees, and pressures on the quality of public services. Nonetheless, growth is holding up, inflation is low, the current account deficit is narrowing, international reserves are at a comfortable level, and the banking system is robust. Program performance remains broadly on course. All end-March 2015 performance criteria (PC) are expected to be met. Structural performance saw improvement, including the pre-approval of a credit bureau and the establishment of a new public investment framework. Public sector adjustment needs to continue with the windfall from lower oil prices saved. Jordan will benefit from lower oil prices in the short term, including through a boost to domestic demand, a lower current account deficit, and an improvement in the finances of the electricity company NEPCO. Over the medium term, however, such benefits would fade owing to potentially lower capital and income flows from the GCC, as well as an already programmed shift to a less-expensive energy mix for NEPCO. To gradually reduce Jordan’s high public debt, it is therefore critical to adhere to the planned fiscal adjustment, including through continued deep tax reform and the full implementation of the medium-term energy strategy. Now is the time to move forward with labor market reform. There is an urgent need for broad-based policy actions in the labor market to put the unemployed into jobs, increase female labor force participation, and reform public sector compensation and hiring practices. Continuing improvements in the business environment and the quality of public institutions are also important. The authorities are working toward a 10-year framework for economic and social policies, Vision 2025, which could drive such reforms, and an important step will be to anchor this framework in a medium-term macroeconomic and fiscal framework. The completion of the sixth review makes available SDR 142.083 million (about $196.5 million).
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