The International Monetary Fund on Wednesday reached a preliminary $2 billion loan agreement with Jordan, where the economy has been slowed by higher oil prices and uncertainty in the aftermath of the region’s Arab Spring protests.
“The IMF staff agreed to support Jordan’s agenda for a socially acceptable fiscal consolidation,” the IMF said in a statement. “It will provide liquidity during the next three years, which will allow the authorities to gradually implement their agenda.”
It said Jordan’s economy had been hit by exogenous shocks that were outside the government’s control.
Regional political tensions, coming from Syria and Egypt, and a slowing global economy have hit tourism to Jordan and caused a drop in worker remittances and foreign direct investment, the IMF said.
“To guard against additional shocks, the Jordanian government asked for financial assistance from the IMF,” a statement said.
Flanked by a circle of instability, Jordan has been ravaged by spluttering natural gas supplies from revolutionary Egypt and a flood of refugees crossing the border from war-torn Syria.
In addition, large financing needs to protect consumers from the increase in energy prices in 2011 were further deepened in 2012 by the need to provide housing and medical services to refugees from Syria,” adding to already high public debt, the IMF said.
The energy-poor country has expressed concerns that cuts in natural gas supplies from Egypt could cost the kingdom more than $2 billion dollars in 2012.
In response to the negative external shocks, the Jordanian government has undertaken a reform program to put fiscal and energy policies back on a sustainable path, the IMF said.
“To avoid sharp adjustments that could adversely affect growth and the vulnerable parts of the population and to guard against additional shocks, the Jordanian government asked for financial assistance from the IMF,” the Washington-based global lender said.
“These policies are expected to justify the exceptional level of access to Fund resources... and deserve the support of the international community, in the form of additional grants as well as official investment,” the IMF said.
The agreement requires approval by the IMF executive board, which would make its decision “in the near future,” it said.
On Sunday, the U.S. ambassador to Jordan, Stuart Jones, said that Washington had given $100 million in aid to Jordan to help host the Syrian refugees and meet its growing energy needs in light of the gas supply disruptions.
The aid is in addition to the $660 million approved by Washington in December as military and economic aid to Jordan, which has received $2.4 billion from Washington in the past five years.