MAJOR STRUCTURAL REFORM DEVELOPMENTS
A new IMF programme has been signed.
The new programme, approved by the IMF board in March 2020, is a four-year US$ 1.3 billion Extended Fund Facility. This is the third consecutive IMF-supported programme since 2012. The new programme aims at achieving stronger and more inclusive growth and creating jobs, with implementation centered on growth‑enhancing structural reforms and a gradual reduction in the budget deficit. Key reforms envisaged under the programme include electricity tariff reform, labor market reforms to promote greater employment opportunities for women and young people, and the swift implementation of the authorities’ five-year matrix, launched at the 2019 London Initiative, to improve the business climate, boost competitiveness, and attract foreign investment. These efforts are supported by governance reforms to strengthen public-sector transparency and accountability. The IMF also approved in May 2020 Jordan’s request for emergency financial assistance under the Rapid Financing Instrument, equivalent to US$ 396 million, to cover about a quarter of Jordan’s external financing needs stemming from the Covid-19 shock.
An ambitious green growth plan has been launched.
The National Green Growth Plan 2021-25, launched in July 2020, is part of a broader national drive towards a green economy and sustainable development. It comprises executive plans targeting the key sectors of water, waste management, energy, agriculture, tourism and transport. In part, the blueprint is intended to help build sustainable sectors that are more resilient and adaptive to adverse phenomena, including climate change and the fallout of emergencies, such as the coronavirus pandemic. It was drawn up in collaboration with the Global Green Growth Institute. Already, the government has cut taxes on cars imported into Jordan’s free zones, including eliminating a weight tax on vehicles and lowering customs duties on electric vehicles.
A new legislative framework for public-private partnerships (PPPs) is in place.
The new legislation, which came into effect in August 2020, strengthens the identification, approval, implementation and evaluation process of PPPs in several ways. Under the new rules, the PPP unit is moved to the prime minister’s office, a new ministerial committee will select suitable projects and refer them to cabinet, and another committee will assess contingent liabilities and thereby financial risk to the government. The new legislation also ends the exemption under the previous law of the water and energy sectors, which had hindered sound project selection and risk analysis.
The government has launched an anti-corruption campaign.
As part of the campaign, the government approved in June 2020 a draft law amending the Integrity and Anti-Corruption Law of 2020. The campaign is targeted against former officials, businesspeople and companies suspected of tax evasion, money laundering, abuse of power and embezzlement. The government also announced that tax evasion would be treated as money laundering, which carries a harsher sentence. The amendments to the law give the Integrity and Anti-Corruption Commission (JIACC) more financial and administrative independence to enable it to perform its duties and enhance its capabilities in pursuing corruption-related issues. They also give the JIACC the right to conduct investigations related to money-laundering crimes resulting from corruption cases and to reconcile with those who commit these crimes if they return the money they obtained.
A new agricultural strategy has been announced.
The Ministry of Agriculture announced the 2020-25 National Agricultural Development Strategy in August 2020. The strategy focuses on the restructuring and digitization of the agricultural sector, the utilization of modern technology, enhancing production and productivity, focusing on strategic crops, and developing the logistics chain of operations. It also prioritizes uplifting the agro-processing chain, developing the export chain, and expanding forest and pasture areas.
- The economy is being impacted by the Covid-19 crisis. The pandemic and related containment measures have led to a deteriorating fiscal balance, rising public debt and a further increase in the already-high rate of unemployment.
- The authorities have implemented a range of fiscal, social and monetary measures to combat the crisis. The Central Bank of Jordan (CBJ) increased liquidity and lowered interest rates, while the government postponed tax and other contributions, and allocated support to those sectors and segments of the economy most in need.
- The authorities have agreed a new programme with the International Monetary Fund (IMF). The third consecutive IMF-supported programme since 2012 will help the authorities build on the implementation of the authorities’ five-year matrix, launched at the 2019 London Initiative.
- Swift implementation of key reforms envisaged under the IMF-supported programme are necessary. These include electricity tariff reform, labor market reforms and improvements in governance to strengthen public sector transparency and accountability.
- Improving the fiscal situation is needed to stabilize public debt and bring it towards more sustainable levels. Broadening the tax base, reducing tax exemptions, overhauling investment incentives and reforming the governance of tax and customs administrations should be complemented by spending containment and subsidy reforms, in addition to improving the targeting of social safety nets.
- Implementation of the government’s anti-corruption campaign should be prioritized. The newly empowered Integrity and Anti-Corruption Commission (JIACC) should pursue corruption-related issues, especially those related to tax evasion, money laundering, abuse of power and embezzlement.