Washington DC, June 4, 2019 — The World Bank Group’s Board of Executive Directors approved today a US$1.45 billion financing package to help Jordan stimulate inclusive growth and create more jobs for all. The Second Equitable Growth and Job Creation Development Policy Loan (DPL2) contributes through far reaching and progressive reforms to launching Jordan as a country Open for Business.
The new package is designed to disburse in two equal tranches to support the Government’s new economic plan for growth and to allow adequate time for completion of necessary additional reforms that are central to the achievement of the program overall results. The package comes at a significantly lower financing cost than market rates and benefits from guarantees of $250 million by the United Kingdom and $200 million by the Kingdom of Saudi Arabia. The terms of the loan are concessional, and the maturity of the loan is for 34 years. In financial terms, DPL2 provides significant advantage over market-based financing for budgetary needs.
Over the last decade, Jordan has endured external shocks and regional challenges, including a sudden halt in its main energy supply, an inflow of an estimated 1.3 million Syrian refugees, and a cut off of crucial trade routes through neighboring states. Jordan responded by conducting a massive fiscal consolidation while preserving its economic and social stability, growing at approximately 2 percent annually over the past two years. “Jordan has displayed resilience to exogenous shocks, commitment to its reform process, and a determination to remain a bedrock of stability and hospitality throughout. But this has taken a tangible toll on Jordanian citizens, with unemployment at record high and a high current account imbalance,” said HE Dr Mohamad Al-Ississ, Minister of Planning and International Cooperation and Minister of State for Economic Affairs. “The next period must be a shift towards equitable, sustainable, and tangible growth. This will be done through strategic, evidence-based reforms that drive growth and economic sustainability.”
To this end, a crucial element of DPL2 is to energize private sector growth by supporting reforms that: promote foreign direct investments and exports in service sectors that are advantageous for Jordanians; streamline licensing and inspections to ease doing businesses, particularly for small businesses; improve credit infrastructure (through Insolvency and Secured Transactions Laws); and develop new regulations for public procurement to reduce fiscal costs and boost transparency. The reforms, which Jordan has already started, will strategically target economic elements in need of improvement. This comprises promoting broadband services to harness the potential of the digital economy for Jordan’s youth and developing new legislation for public private partnerships to institutionalize investment. It also includes addressing Jordan’s energy costs through a Roadmap for Financial Sustainability of the Energy Sector, a structural transformation that deals with the sector’s financial and operational viability and long-term regulatory environment.
“The World Bank remains committed to support Jordan in laying the foundations for a stronger and more outward oriented economy that maximizes its growth potential and provides better opportunities for the Jordanian people,” said Saroj Kumar Jha, Mashreq Regional Director, World Bank Group. “We commend the Government of Jordan’s commitment and efforts to opening its markets and creating opportunities for new investments in priority sectors of the economy”.
On the social side, alongside Jordan’s growth agenda must be a targeted, reliable social safety nets system. A National Social Protection Strategy was endorsed and the National Aid Fund expansion program was also launched: Takaful will increase social protection coverage to an additional 85,000 households by 2021. The program brings an improvement in the targeting system and adopts a digitalized payment system for better transparency. Furthermore, the government adopted a smart gender agenda. To encourage employment of women and youth, new legislation was passed to promote and regulate flexible work and facilitate the establishment of childcare centers at the workplace. Gender related references were removed from labor laws and bylaws. Codes of conduct that address harassment in the public transport system and workplace were also adopted.
“The DPL2 will allow Jordan to build on the momentum and take its reform program forward”, said Christos Kostopoulos, World Bank Lead Economist. “The program supports further improvements in the business environment and a simpler, less bureaucratic and more user-friendly investor journey. It will also promote the update of the legal framework for public procurement and the extension of the national broadband fiber access network. In addition, the DPL2 will allow the government to continue to expand and improve the targeting of social safety nets for the poor and vulnerable.”
The DPL2 brings the World Bank Group’s total commitments to Jordan to US$2.78 billion, of which US$228.2 million are financed by the Global Concessional Financing Facility (GCFF). Launched in 2016, the GCFF provides concessional financing to middle income countries hosting large numbers of refugees at rates usually reserved for the poorest countries.
