AMMAN – According to Al-Mamlaka TV, the government agreed on
a new program with the
International Monetary Fund (IMF) on Wednesday that aims
to improve resilience in the face of growing global and regional challenges,
support financial policies, address structural barriers to growth, create job
opportunities, and complete a comprehensive review of all energy purchase
agreements.
اضافة اعلان
Addressing regional events and Jordan’s high unemployment
rate
The IMF published a letter of intent from the Finance
Minister, Mohammad Al-Ississ, and the
Central Bank of Jordan (CBJ) Governor,
Adel Al-Sharkas, in which the government stated that the recent
Extended Fund Facility (EFF) agreement with the fund was successful and helped Jordan build
resilience and maintain it, absorb successive shocks, and maintain overall
stability.
It emphasized that Jordan's external environment
"remains difficult," with increasing global and regional tensions,
rising interest rates, and uneven global development.
It stated that the
war in Gaza has a negative impact on the
Jordanian economy by reducing tourism and investment revenues, as well as the
possibility of rising fuel prices and borrowing costs, explaining that Jordan
is capable of overcoming the crisis with international support “if there is no
significant escalation.”
The government confirmed that it has been able to maintain
stability in the overall economy and reduce financial and external imbalances
and weaknesses over the past few years, where wise financial and monetary
policies have helped support comprehensive economic growth in the face of
various external shocks, maintain monetary and financial stability, and keep
inflation low.
According to the letter of intent, these policies have
helped increase reserves and reduce the budget deficit, including by expanding
the revenue base in a sustainable and equitable manner, gradually lowering
public debt, maintaining market access under favorable conditions, and
maintaining confidence in the Jordanian economy amidst difficult global
tensions.
The government confirmed that its financial and monetary
policies are on the right track to meet specific goals in its program with the
fund, where it established a ministerial committee responsible for reviewing
overdue debts and signed memoranda of understanding to ensure data exchange
from various government agencies with the
Department of Statistics (DoS), in
addition to the success in implementing the action plan of the
Financial Action Task Force (FATF) to enhance the effectiveness of the anti-money laundering and
counter-terrorism financing framework, which helped Jordan exit the gray list
as of October 2023.
The government explained that despite its achievements,
"unemployment rates are still very high," particularly among women
and young, and that growth, despite its resilience, has not met its
expectations. "There are still needs in the balance of payments,"
including looming debt service commitments and the need to improve reserve
building while addressing climate and health problems.
“Unemployment rates are still high, exceeding 22 percent,
and are extremely high among youth and women, reaching 47 percent and 31
percent, respectively,” according to government data.
The government stressed the need for "strong, timely
support from international development partners to continue to help Jordan
overcome global and regional adverse developments, address the challenges posed
by climate change, and bear the burden of hosting a large number of
refugees."
It emphasized that the new agreement will focus on
continuing to gradually adjust public finances to put public debt on a steady
downward trajectory to less than 80 percent of the GDP by 2028, protecting the
exchange rate link with appropriate monetary policies, and accelerating
structural reforms to stimulate job-rich growth.
The government has confirmed that the new agreement will
work with the economic reform vision strategies to continue improving the
business environment, obtaining financing, labor market flexibility,
competition policies, public administration, as well as the
financial feasibility and efficiency of utility sectors such as electricity and water.
The government has maintained its commitment to improving
protection for the most vulnerable populations by increasing social safety
nets, boosting public service delivery, and promoting good governance
practices.
The government has requested support from the IMF through a
new extended agreement under the EFF for 48 months in the amount of 926.370
million
Special Drawing Rights (SDR) (270 percent of Jordan’s quota).
The government emphasized that the high interest rate
environment has a dampening effect on inflation, reflecting the CBJ’s monetary
policy commitment to protecting the exchange rate link, explaining that the
inflation rate has fallen slightly to just over 1 percent in September 2023
over the past twelve months.
Reviewing energy agreements and practices in the Kingdom
As stated in the same letter of intent from Ississ and
Sharkas, the government will implement a strategy to reduce the cost of energy
generation from the
National Electric Power Company (NEPCO) by April 2024 based
on legislative and contractual analysis.
On September 13, 2023, the Ministry of Energy and Mineral
Resources launched a study to review renewable energy and traditional energy
purchase agreements from a technical, economic, commercial, and legal
perspective, with the goal of learning from best practices in the region and
similar field experiences.
It also stated that it will implement an executive strategy
to lower electricity sector costs and increase efficiency, ensuring NEPCO's
long-term financial sustainability while supporting the transition to renewable
energy sources. The blueprint is expected to be adopted in October 2024,
according to the report.
The government confirmed that it has conducted a review of
agreements with electricity distribution companies and has appointed an
international consulting firm to conduct a comprehensive review of the
electricity system, including generation, transmission, and distribution, and
propose the necessary measures to achieve the financial sustainability of
NEPCO.
The government is expected to take several measures to
improve the financial situation of NEPCO in the near future, including
tendering for the construction of a wide-area distribution network using the
fiber optic infrastructure of NEPCO, the Irbid District Electricity Co. Ltd.
(IDECO), and the electricity distribution company by March to generate
additional flows in the revenues of NEPCO, where the contract is expected to be
awarded by July 2024.
Additionally, the government has committed to implementing
major reforms in the energy sector to permanently reduce the losses of NEPCO,
acknowledging that the scope for significant improvement in the financial
situation of NEPCO in the near term “will be limited” due to long-term
contractual obligations on both the generation and distribution sides, as well
as the presence of an environment characterized by high interest rates and
sluggish demand as consumers shift to renewable energy.
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