Jordan is an upper middle-income country with a population of 6.4 million and a per-capita GNI of US$4,340. The population is around 80 percent urban and is one of the youngest among upper-middle income countries with 38 percent under the age of 14. Read More »
Jordan is an upper middle-income country with a population of 6.4 million and a per-capita GNI of US$4,340. The population is around 80 percent urban and is one of the youngest among upper-middle income countries with 38 percent under the age of 14. The country has limited natural resources, potash and phosphate are its main export commodities, limited agricultural land, and water is especially scarce. Jordan ranks as the world’s fourth poorest country in terms of water resources. Services account for more than 70 percent of the gross domestic product (GDP) and more than 75 percent of jobs. As one of the most open economies of the region, Jordan is well integrated with its neighbors through trade, remittances, foreign direct investment (FDI), and tourism, and has especially strong links to the Arab Gulf economies. Jordanian policymakers aim to use the demographic opportunity of a well educated, young population to build a dynamic, knowledge-based economy.
As a result of its open economy and high degree of regional integration, Jordan is vulnerable to the political, economic, and social volatility of the region. The political upheaval that swept the Arab region has had a significant impact on Jordan taking the form of economic shocks as well as inspiring domestic demands for stronger citizen voice, greater accountability, and improvements in living conditions. The regional political upheaval impacted Jordan economically through two channels: (i) the sharp drop in gas supplies from Egypt led to a surge in Jordan’s current account and fiscal deficits; and (ii) the Syrian conflict has led to a large influx of refugees which is further straining Jordan’s difficult fiscal position and putting pressure on service delivery in host communities.
More than two years of violent conflict in Syria has resulted in massive movements of people to Jordan. According to the Office of the United Nations High Commissioner for Refugees (UNHCR), 537,000 Syrian refugees have crossed into Jordan. While some of the Syrians are living in camps, the majority — as much as 70 percent —are staying in urban centers, where they share space, resources and services with their Jordanian hosts. This influx has rapidly expanded the population of many towns. The additional pressures are undermining the coping mechanisms of public institutions, communities, households, and individuals. Public authorities lack the resources to keep up their service provision, such as maintaining health and education services, providing adequate roads, transportation, and street lighting, ensuring waste collection and disposal, and delivering core social services. Due to emergency needs, funds from planned capital expenditures have been diverted towards immediate operating costs. These may eventually impact longer term development outcomes. Prolonged turmoil in Syria will strain Jordan’s social stability and security situation.
One of the government’s principal goals is to expand access to higher quality education and to provide the skills needed in a competitive economy. In terms of human development, Jordan is above average in relation to middle-income countries. These positive results are based on consistent levels of spending—more than 25 percent of GDP—on human development, education, health, pensions, and social safety nets. In addition, Jordan ensures a high level of gender parity in access to basic public services. In education, the government launched in 2003 a comprehensive cutting-edge modernization program aimed at overhauling the basic education system to align it with the needs of a knowledge-based economy. School enrollment rates at each level of education are close to other countries at Jordan’s income level. A growing population is exerting increasing demand on both health and education services and the influx of refugees is placing additional demand on these and other social services.
Economic and fiscal conditions have improved slightly in early 2013, after a challenging year in 2012. With gas supplies from Egypt shrinking to 16 percent of contractual terms in 2012, Jordan had to rely on expensive fuel imports to generate the country’s electricity. This led to a rapid deterioration of Jordan’s balance of payments and fiscal positions in the first half of 2012. As a result, an International Monetary Fund’s (IMF) Stand-By Arrangement (SBA) was approved in August 2012 (exceptional access to 800 percent of quota or about US$2 billion). For the year 2012, the current account deficit reached 18 percent of GDP (up 6 percentage points of GDP from 2011) while the overall fiscal deficit reached 8.5 percent of GDP (up about 2 percentage points of GDP from 2011). The elimination of all petroleum product price subsidies, except for liquefied petroleum gas (LPG), and the doubling of gas flows from Egypt since November 2012 helped reduce the acute macroeconomic pressures. The introduction of a broad-based cash compensation transfer in lieu of the petroleum subsidies has likely improved public spending progressivity.
Following pressures in late 2012, policy measures and external assistance have since boosted foreign reserves and confidence in the peg is returning.Although net international reserves (NIR) halved in 2012 to US$5.4 billion (to 3 months of imports), these have improved since due to monetary policy tightening by the central bank in December, a doubling of gas inflows from Egypt since November, and the receipt of US$1.2 billion in grants in early 2013. As a result, confidence improved and dollarization has partly reversed. This has enabled the Central Bank of Jordan to cut its policy rate in August, notwithstanding rising core inflation (to 3.6 percent at end-June, up from 3.3 percent in December 2012) and a renewed dip in gas inflows from Egypt due to a new pipeline explosion in early July. The inflationary impact of the fuel price increase in November 2012 has subsided, aided by a pass-through of lower oil prices. However, food prices (including domestically produced food) and rents have increased significantly in the first half of the year, likely driven by increased demand from refugees. Financial markets have been stable since the onset of the IMF SBA in August 2012.
Jordan’s external debt reached 22 percent of GDP in 2012 and is projected to remain sustainable under the most adverse scenario (IMF SBA review; April 2013). A debt sustainability analysis of Jordan’s public debt, however, reveals that under a number of shocks, the country’s debt dynamics would not be stabilizing over the medium-term. A robust implementation of the fiscal consolidation plan under the SBA is therefore critical to rebuild buffers. Public sector debt rose sharply in 2012, reaching 80 percent of GDP at end-December, up from 70 percent of GDP at end-2011.
Over the past 10 years, Jordan has pursued structural reforms in education, health and privatization/liberalization and they have progressed well. In addition, the Government of Jordan (GoJ) has been working towards social protection systems and subsidy reforms, improving the conditions for greater public private partnerships in infrastructure, and tax reforms, including improvement of tax administration and management.
However, sound economic policies and additional reforms will be necessary to reduce the vulnerability of the country to external shocks. Challenges include vulnerability to fluctuations in the international oil market due to the country’s high energy import dependency and disruption of gas supplies from Egypt; high unemployment and dependency on remittances from Gulf economies; increasing pressure on natural resources, especially water; and escalating spillovers from the Syrian conflict. The greatest challenge (and also the largest opportunity) remains the necessity to create adequate conditions for increased private investment and improved competitiveness. This will help deliver the high and sustainable growth needed to create employment and to reduce poverty. Staying the course with the implementation of the fiscal consolidation program may prove challenging but is a necessary condition (though not a sufficient one) to maintaining a strong economic performance.
Jordan has experienced its own version of the “Arab Spring.” Since February 2011, low-scale but persistent demonstrations have challenged the government to initiate political reform and address economic governance. The different Governments since have responded by embarking on a process of gradual reform. The Parliament has approved constitutional changes to strengthen the independence and integrity of Judiciary bodies thereby improving public accountability. The government is pursuing reforms in transparency and accountability, public finance management (in particular budget and debt management and public sector spending efficiency) and private sector development. Sustained progress in the implementation of structural reforms and a supportive regional and external environment are critical for sustaining good economic performance in the period ahead.
Updated: September 2013
The Country Partnership Strategy (CPS 2012-2015) was discussed by the Bank’s Board of Directors on January 24, 2012. The World Bank Group will support Jordan in its efforts to build stronger growth resilience and to support job creation through a three-pronged strategy: (i) strengthen fiscal management and increase accountability to support public financial management; (ii) strengthen the foundation for sustainable growth with a focus on competitiveness; and (iii) enhance inclusiveness through social protection and local development. The strategy supports the government’s central objectives of focusing on fiscal consolidation, growth, job creation, private sector development, and governance, as expressed in the Economic Development Plan. A CPS Progress report is scheduled for the fiscal year FY14.
The World Bank’s active portfolio in Jordan comprises investments in the Urban Development, Education, Energy, Environment, Public Sector Governance and Finance/Private Sectors, Public Administration, and Social Services. Currently, investments in Social Services account for the highest share of the portfolio at 33 percent followed by the urban development sector at 22 percent. As of September 2013, Jordan’s active portfolio is valued at US$459.17 million, of which 95 percent is financed by the International Bank for Reconstruction and Development (IBRD), eight projects, including one guarantee project, for a total of US$435.3 million, and 5 percent is financed by Bank-administered trust funds (22 projects). The trust fund portfolio mainly supports government accountability, capacity building, environmental sustainability, and local development/inclusion. Jordan is also supported through a comprehensive technical assistance program in poverty analysis and strategy formulation, subsidy reform, employment strategy formulation, competitiveness, and innovation.
The World Bank also provided support on emerging needs: a recently approved Emergency Project to Mitigate the Impact of the Syrian Crisis (US$150 million in July 2013) finances additional government expenditures on health services (vaccines and supplies) and household consumables (bread and cooking gas) incurred as a result of the Syrian refugee influx. A follow-on municipal project (US$50 million in grants) is being prepared to strengthen the ability of hosting communities to cope with the crisis, in terms of service provision and social cohesion. It is being prepared with the UK and Canada and in coordination with UNDP, UNHCR, and the EU.
The Ministry of Planning and International Cooperation takes the lead in the dialogue with its development partners but there is room for more coordination among donors. Given the strong presence of a number of other development partners in Jordan, the World Bank Group’s (WBG) support is often complemented by the work of others to ensure complementarity and coordination through technical and financial support.
Canadian International Development Agency (CIDA); Arab Fund for Economic and Social Development (AFESD); United Kingdom Department for International Development (DFID); European Investment Bank (EIB), European Commission; Japan International Cooperation Agency (JICA); Kreditanstalt fur Wiederaufbau (KFW); Islamic Development Bank (IDB)
Public Financial Management Reform
United States Agency for International Development (USAID); JICA; International Monetary Fund
Business Environment and Micro- Small/Medium Enterprise Development
Agence Française de Développement (AFD); USAID; EIB; DFID; European Union; IDB
USAID; KFW; AFD; JICA; EIB; GIZ
Local Municipal Development Sector
European Union; AFD; UNDP; DFID; CIDA
Updated: September 2013
Micro, Small, and Medium Enterprise Development for Inclusive Growth Project: The objective of the project is to contribute to the improvement of access to finance for Micro, Small, and Medium Enterprises (MSMEs) in Jordan. The project component consists of a line of credit to MSMEs in the amount of US$70 million, which will be channeled through the Central Bank of Jordan (CBJ), the implementing entity. As of September 11, the project has disbursed US$ 47.875 million, accounting for 68.39 percent of the total loan amount, which was allocated to 12 private and foreign banks (which exceeded the projected 3 banks by FY14), creating an estimated amount of 1,000 jobs.
Second Education Reform for the Knowledge Economy Project (ERfKE II) (IBRD): Achievements so far include, among others: (i) successful implementation of the Jordanian model of school-based program in two thirds of the schools in Jordan; (ii) the finalization of a framework for Early Childhood Development (ECD) and Special Education; (iii) the successful expansion and piloting of quality kindergartens (KGs) and of highly innovative alternative KG provision all over the country (gross enrolment rate in KG increased from 52.3 percent in 2009/2010 to 57.7 percent in 2011/2012); (vi) the setting up of an Open Education Management Information System (EMIS) fully owned by the Ministry of Education (MOE) and the ongoing firm commitment of MOE to continue to publish monitoring and evaluation reports in the MOE website, thus promoting a culture of transparency in the sector which will allow for a more informed public debate in education in Jordan and for evidence-based decision making and (vii) the construction of 19 new schools and rehabilitation of 21 schools to provide access to safe and adequate school facilities to basic and secondary students. In addition, enrolment rates in primary and secondary education have increased (from 96.9 percent to 97.8 percent and from 60.4 percent to 75.8 percent respectively), exceeding their target values.
Mitigate the socio-economic impact of Syrian displacement in Jordan (SPF grant): After activation of the grant on September 1, 2012, Save the Children immediately started implementation. For the Parent Child Centers, eight parent child centers are operational (two more are close to finalization) which have already benefited 2,575 children and mothers. Two community mobilization campaigns were conducted in Ramtha and Mafraq, with a total of 450 attendees in both. 2,003 young men and women (14-18 years) were trained on life skills and community initiatives through non-formal education activities. 532 youth have received training at Vocational Training Centers. Further 430 people were trained on Family market Literacy. A micro-economic assessment identifying the causes of economic vulnerability has been conducted, based on focus group discussions in Mafraq, Ramtha and Northern Jordan Valley. Under the health service component, 150 children have been examined and given treatment, while 72 children were referred to MoH facilities.
Justice Sector Reform - The Enhancing Community-Driven Legal Aid Services for the Poor (JSDF Grant) and Extending Legal Aid Services to Displaced Iraqis and Palestinians (SPF Grant) programs were launched with the implementing partner the Justice Center for Legal Aid. Legal aid centers have been established in Amman, Irbid, Zarqa, and Aqaba. Plans are underway to extend services to Mafraq, Jerash, Ajloun, Karak and Ma'an. Public awareness sessions took place in Amman, Zarqa, Rusaifah and Madaba covering the following topics: sexual harassment, personal status issues, labor law, rights of children, landlord-tenant law, social security benefits, inheritance, and elections law. More than 1,000 people (726 women and 325 men) have benefited from legal counseling sessions and representation by lawyers to roughly 800 beneficiaries (540 women and 260 men) in court proceedings mostly related to personal status cases. The capacity building program to the Ombudsman Bureau (IDF Grant) has resulted in improved human resources practices and development of a training program for staff. The Ombudsman Bureau has also launched a dialogue with public sector entities receiving the most complaints (Ministries of Education, Health, Interior, and Greater Amman Municipality) to improve procedures for implementing recommendations.
International Finance Corporation (IFC) Through an integrated investment and advisory program, IFC has assisted in the development of the financial sector by increasing access to finance to underserved groups. IFC has helped to: (i) promote the leasing sector by strengthening the legislative regime and clarifying the tax treatment of leasing; (ii) support the preparation of the corporate governance code for banks in Jordan; (iii) support the microfinance sector especially targeting women; (iv) stimulate the housing finance market through an investment in a new mortgage finance company, support for the Jordan Mortgage Refinance Company, and advisory services to support new legislation for the sector; and (v) assist the GoJ in drafting the new legislation that will regulate the sharing of credit information. The IFC program has also contributed significantly to investment and private sector development in Jordan. The IFC played a key role in supporting the rehabilitation and expansion of the Queen Alia International Airport PPP project. IFC was the lead advisor to the government in structuring and implementing the project leading to the award of a 25-year concession to the Aéroports de Paris Consortium. A bid of 54.58 percent of gross revenue to the government was the highest revenue-sharing percentage achieved in the world for similar projects.
In addition, the World Bank Group’s high quality analytical and advisory work has made important contributions to the government’s development agenda especially in economic diversification and competitiveness, subsidy reform, poverty assessments, and investment climate reforms.