World Bank Approves $120Mn Loan to Jordan

VOL. XLV

No 27

8-July-2002

JORDAN

World Bank Approves $120Mn Loan to Jordan…

The World Bank announced on 3 July that it has approved $120mn to Jordan, which is the second in a series of three public sector reform loans (PSRL II) to support the government with its program to boost the efficiency of the public sector. The decision to award the loan was based on the government’s efforts to reform the civil service and public administration (including e-government) budgetary and financial management, and the judiciary. The $120mn million loan will be issued in one tranche by the World Bank.

Jordan’s economy has historically been characterized by an oversized public sector with limited private sector leadership and protected local industries. Charles Humphreys, World Bank Task Manager for PSRL II praised the government’s effort to create a more accountable, performance-oriented public sector. “This is necessarily a long term effort, consisting of many small steps, which will require constant and transparent monitoring.” Humphreys affirmed the Bank’s plans to keep on working with the Jordanian government, “We stand ready to continue our collaborative work with Government in moving its agenda forward.”

…And IMF Approves $113Mn Stand-By Credit

The IMF announced, also on 3 July, that it had approved a two-year stand-by credit for SDR85.28mn (about $113mn) for Jordan in support of its economic reform program. As a result of the Board's decision, Jordan will be able to draw SDR 10.66 million (about $14mn) immediately. Eduardo Aninat, IMF Deputy Managing Director and Acting Chairman, said that Jordan has established a favorable track record under the extended fund facility (EFF) program which was successfully completed in May.

Jordan and the IMF had already agreed on a new reform program for 2002-04 prior to the debt talks scheduled with the Paris Club this week. The program aims to reduce foreign debt from the current level of 80% of GDP to 65%, raise the economic growth rate to 6% in 2004 from the 5% forecast for 2002 and maintain foreign currency reserves at above the $3bn level (MEES, 1 July). At the Paris Club Jordan is aiming to restructure its debt and if it is able to reach an agreement it will get temporary relief from principal and interest annual debt servicing.

The new IMF program is aimed at raising economic growth and fostering employment creation through an acceleration of structural reforms and continued implementation of sound macroeconomic policies. The public debt is projected to continue to decline significantly as a ratio to GDP over the program period. At the same time, health and education spending, as well as income transfers to the poor, will be increased under the authorities' Plan for Social and Economic Transformation, which is being financed with non-debt creating flows. It is expected that exports will continue to grow at a healthy rate, and the external position will remain strong, noted Mr Aninat. He said that the government's pension system will be overhauled during the program period, reducing pension liabilities in net present value terms by 30% over the next 50 years. The tax system will be reformed to improve its buoyancy and simplify its administration. The privatization program will be accelerated and extended to cover most of the remaining enterprises in the public sector.