Jordan will get a loan of about $2 billion from the International Monetary Fund as the country’s borrowing costs surge on political unrest in the region.
The IMF agreed to a request for a 3-year stand-by accord “in support of the government’s economic reform program,” the Washington-based lender said on its website. The agreement is subject to approval by the IMF’s executive board.
Yields on Jordan’s one-year debt in local currency have doubled since February last year when Egypt’s Hosni Mubarak was overthrown. Since then, repeated attacks on the gas pipeline from Egypt have raised energy costs, and the civil war in neighboring Syria has deterred tourism and foreign investment.
“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 said.
Foreign direct investment tumbled 32 percent in 2011, according to the World Bank. The tourism industry lost about 700 million dinars ($988 million), Amman-based Al-Rai newspaper reported May 31, citing Tourism Minister Nayef Fayez.
Economic growth may decline to 2.1 percent this year, the slowest since the height of the global crisis in 2009, according to HSBC Holdings Plc. Still, Jordan’s central bank has raised interest rates twice this year to shore up savings in dinar.
The flow of Syrian refugees into Jordan, estimated by the government at more than 130,000, is adding to the strain by placing increased demands on the country’s housing stock and limited water resources, Jordan Perry of U.K.-based risk analysis company Maplecroft said in an email today.