Jordan hopes a new program with the IMF next year would secure lower servicing of $42 billion in public debt that has spiraled in the last decade as a result of a spillover of regional conflict on its economy, the country’s finance minister said on Sunday.
Mohammad Al Ississ said talks with the International Monetary Fund over a new program to succeed a three-year extended fund facility (EFF) that ends in March would focus on efforts to spur sluggish growth that has hovered at around 2% in the last decade.
“We hope to reach with the IMF understandings that ensure accelerating the tempo of economic growth,” Al Ississ told deputies during a speech in parliament ahead of approving the 9.8 billion dinars ($14 billion) draft 2020 budget.
“The interest on public debt comprises a big part of our current expenditure and its growth at an accelerating tempo is a real threat to our public finances.”
Growth was expected to rise to 2.2% compared with a forecast 2% this year, in line with IMF projections, Al Ississ said.
The country’s economic growth has been hit in the last few years by high unemployment and regional conflict weighing on investor sentiment, and as demand generated from Syrian refugees receded, according to the IMF.
Al Ississ blamed regional factors on the spike in public debt that shot up by almost a third in a decade to 30.1 billion dinars ($42.4 billion) in 2019, equivalent to 97 percent of GDP.
A new IMF deal would help the cash strapped country secure concessional grants and loans at preferential borrowing rates to ease annual debt servicing needed top reduce the debt to GDP ratio, Al Ississ said.
The IMF said in November at the end of a mission to conclude the final review of its program that public debt remained “very high” and that “international assistance” would be critical to allow “continued growth enhancing reforms.”
The spiraling debt is at least in part due to successive governments adopting an expansionist fiscal policy characterized by job creation in the bloated public sector.
Past governments also hiked spending on welfare and public sector pay in a move to ensure stability in the aftermath of the “Arab Spring” protests in the region in 2011.
Jordan was committed to a gradual and steady reduction in a chronic fiscal deficit that is expected to reach 1.247 billion dinars next year, or 2.3% of gross domestic product compared with an estimated 3.1% this year, Al Ississ added.
Al Ississ said efforts to rein in public expenditure alongside a stimulus package for the private sector would boost revenues hurt by a slowdown in the economy and pervasive tax evasion.