Jordan and the IMF: Stability achieved, reform ahead

The recent agreement between Jordan and the International Monetary Fund (IMF) highlights six key pillars shaping Jordan’s economic outlook: Maintaining relative macroeconomic stability amid regional instability, cautiously optimistic growth projections for 2025, a focus on long-term structural reforms in critical sectors, continued commitment to fiscal discipline, persistent challenges in the labour market, and strong economic fundamentals supporting future recovery.

These elements portray an economy with significant potential, yet emphasise the need for accelerated reforms and broad national commitment to sustain recent progress.

The agreement is subject to approval by the IMF’s management and the Executive Board.
The completion of this review will make SDR 97.784 million (about US$130 million) available, out of the approved program size of SDR 926.370 million (about US$1.2 billion). 

Despite the ongoing conflicts in Gaza and Lebanon, and rising uncertainty in global trade and financial markets, Jordan’s economy has managed to remain relatively stable.

Real GDP growth in 2024 reached 2.5 per cent, and inflation remained contained at below 2 per cent. This performance reflects the resilience of Jordan’s economic framework and its adherence to sound macroeconomic policies. The Central Bank of Jordan has been central in maintaining monetary stability, keeping the dinar pegged to the US dollar and preserving adequate foreign currency reserves.

On the fiscal side, the government took corrective actions to compensate for revenue shortfalls, helping to limit the fiscal deficit.
Looking ahead to 2025, the IMF projects a modest recovery, with growth expected to reach 2.7 per cent, driven by a rebound in tourism and an improvement in domestic demand.

Several large-scale investment projects, such as the National Water Carrier, are expected to contribute to this momentum, alongside anticipated progress under the Economic Modernisation Vision.

There is also potential for increased regional economic cooperation, particularly with Iraq, Syria, and Lebanon, which could open up new export markets and boost services. However, this outlook remains vulnerable to regional and global risks, and the current account deficit, estimated at 5.9 per cent of GDP in 2024, underscores the importance of careful external sector management.

A particularly significant component of the IMF’s latest review is the advancement toward an agreement under the Resilience and Sustainability Facility (RSF).

This facility is designed to help countries address deep-rooted structural challenges and enhance their capacity to withstand future shocks, including those related to climate and health.

In Jordan’s case, the focus is on the water and energy sectors — two areas that represent long-standing sources of inefficiency and fiscal strain.

Reforms in these sectors will be essential not only for improving financial sustainability but also for enhancing competitiveness and creating a more investment-friendly environment.

By targeting long-term structural reforms, rather than short-term fixes, Jordan is signaling a shift in its policy priorities.

This reflects a growing awareness of the need to address the fundamental weaknesses in the economy that have long hindered its growth potential.

These efforts, if sustained and complemented by broader institutional and labor market reforms, can lay the foundation for a more resilient and inclusive economic future.

Raad Mahmoud Al-Tal is head of the Department of Economics – University of Jordan