IMF officials give Jordan some wiggle room on reforms

Reuters

By Anna Yukhananov

WASHINGTON, Oct 12 (Reuters) - International Monetary Fundofficials relaxed some fiscal and other targets for Jordan underits $2 billion loan program as the country struggles to dealwith an influx of Syrian refugees and energy supply disruptions.

The IMF officials on Saturday agreed to give Jordan about$258 million, its third tranche of aid under a three-year loanprogram started last year to help the Middle Eastern countryspeed up economic reforms and boost growth.

The IMF's executive board must still sign off on thedisbursal, which should happen in November.

Jordan will get each subsequent chunk of cash if the IMFdecides it has sufficiently complied with the conditions of theprogram, which include getting the government's finances inorder and cutting subsidies for electricity and fuel. An IMFseal of approval can also help mobilize support from otherdonors.

The IMF had previously set a target for the governmentdeficit and losses at the state-owned electricity firm NEPCO at7.2 percent of GDP for next year, but agreed to relax it byabout 1 percentage point in light of Jordan's tough externalenvironment, Kristina Kostial, IMF mission chief for Jordan,told reporters in a briefing.

The Fund also loosened targets for how quickly Jordan wouldhave to raise electricity tariffs, she said, praising thegovernment's commitment to reforms.

"Jordan has been really hit hard with exogenous shocks,"Kostial said. "When I compare April with where we stand now,it's, I think, even gotten tougher on Jordan," she said. The IMFlast reviewed Jordan's program in April.

"Of course you have to acknowledge the financial realities,clearly, but we want to be as flexible as possible inaccommodating these exogenous shocks," she said.

Jordan has been hard-hit by the cost of an estimated half amillion refugees fleeing the civil war in neighboring Syria andthe influx has further squeezed the economy following afinancial crisis last year.

Jordan, which imports 97 percent of its energy, has alsoseen purchase costs soar above $5 billion in the last two years- equivalent to about 15 percent of its gross domestic product -after supplies of cheap Egyptian gas were disrupted by repeatedblasts of a pipeline.

The disruptions have left Jordan dependent on costly dieseland fuel oil, and the country is preparing a hike in electricityprices, a politically fraught move after street protests eruptedlast year over fuel subsidy cuts demanded by the IMF.

However, there have also been signs of economic recoverywith foreign reserves boosted to about $10.7 billion with aninfusion of Gulf money, and with investors showing risingconfidence in Jordan's economy, officials have said.

Wealthy Gulf Arab states - Kuwait, Qatar, Saudi Arabia andthe United Arab Emirates - have extended a combined $5 billionof project financing to Jordan to help the country recover.

Jordan is also planning to sell a U.S.-backed Eurobond,though it has held off on issuing it due to the fiscal impassein the United States that has spooked global markets.

"Technically everything is ready, that's the only thingwhich is holding this off," Kostial said, in reference to thegovernment shutdown and the standoff in the U.S. Congress.

"Otherwise this could have happened already," she said.

The IMF projects Jordan's economy should grow between 3 and3.5 percent over the next year, supported by Gulf money for newinfrastructure projects and a solid tourism season.

Inflation, which eased to 5 percent year-on-year in August,should also continue to fall.

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