Jordan, IMF reach $2bn loan deal

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International Monetary Fund’s Managing Director Christine Lagarde (2nd L) and IMF Executive Director Shakour Shalaan (L) meet King Abdullah II of Jordan. Photo – Stephen Jaffe/IMF Staff Photograph

The International Monetary Fund announced on Wednesday a $2bn loan agreement has been reached with Jordan as it struggles with surging borrowing costs and political unrest.

The Washington-based lender said on its website it agreed to a request for a 3-year stand-by accord “in support of the government’s economic reform programme”. The agreement is subject to approval by the IMF’s executive board.

“The IMF staff agreed to support Jordan’s agenda for a socially acceptable fiscal consolidation,” the fund said in a statement. “It will provide liquidity during the next three years, which will allow the authorities to gradually implement their agenda”.

“Jordan’s economy has been hit by exogenous shocks that were outside the government’s control,” Kristina Kostial, the IMF’s mission chief for the country, said on the fund’s website. “The government’s effort to cushion their effects has widened the budget gap, and the IMF-backed program aims to correct fiscal and external imbalances without hurting the vulnerable part of the population,” she added.

Government finances were being strained by repeated disruptions to natural gas flows from Egypt that have pushed up energy prices, the IMF said.

According to the World Bank, foreign direct investment (FDI) in Jordan registered a decline of 32% in 2011.

Economic growth may also drop 2.1% this year, the slowest since the height of the global crisis in 2009, according to HSBC Holdings Plc. However, Jordan’s central bank has hiked interest rates twice this year to shore up savings in dinar.

The Hashemite kingdom is facing an influx of refugees from neighbouring Syria, estimated by the government at more than 130,000. Many Jordanians are complaining that the arrival of Syrians is adding strain on the country’s housing stock and limited water resources.

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