Jordan is expected to begin talks with the IMF this month to try to secure an Extended Fund Facility (EFF) with the international lender worth between $700 and $800 million.
The talks come after Jordan successfully completed a three-year, $2 billion Stand-By Arrangement with the IMF last August.
Minister of Finance Omar Malhas told Venture on the sidelines of the Euromoney conference that obtaining the EFF would help Jordan receive help from donor countries and international agencies.
Why are you seeking extra help from the IMF?
The reason we need the program is to be able to qualify for the grants and concession loans we are expecting out of the London conference [Supporting Syria and the Region]. We are working with the London conference and we are at a good level of discussions. It’s just that a prerequisite is to have an IMF program. So we are putting in the IMF program, negotiations will start on May 17, and we will most probably start with the new agreement in the summer, in July. An EFF has no loans involved. We will only put a deposit worth of $700-$800 million with the Central Bank to support the balance of payments.
If the EFF goes ahead, what further reforms will Jordan have to undertake?
Fiscal and structural reforms, basically. We are looking at fiscal ways to reduce debt and the deficit. Regarding the structural reforms, we are going to take steps to stimulate more economic growth and better employment opportunities, and make the economy more competitive.
Is the IMF satisfied with our economy’s performance?
Yes they are. If you saw their latest communiqué, they’re happy given the circumstances. You cannot discount what’s happening around us. We are in a war zone that is putting a lot of pressure on the economy.
But the IMF predicts growth will be between 2.5 to 3 percent this year. Does this show a great optimism in Jordan’s economic prospects?
It’s going to be around 2.7 to 2.8 percent. What we need is more than 5 percent. But given the circumstances and given what’s happening in the area, 2.8 percent is fine.
The IMF obviously wants you to reduce debt. How committed are you to this when public debt is running at over 90 percent of GDP?
We have balance of payment issue because [FDI] has dropped, tourism has dropped, exports have dropped, and remittances of expats have dropped. But life has to go on.
What are the debt targets that you hope to hit going forward?
We expect to reduce debt down to 80 percent by 2021. We are not saying we are going to keep debt static, we said debt as a percent of GDP, so as the economy is growing you can still borrow but the growth in borrowing has to be less than the economic growth.
What about other developments the IMF would like to see, such as public sector reforms?
We have placed a quasi-total freeze on public sector employment and it’s an ongoing process, because I think we have some excess baggage in the public sector. As people are retiring we will not replace them except if we talk about schooling and health care.