by Omar Obeidat
The Jordan Times
Jan. 26/ 2012 - AMMAN — The World Bank Group (WBG) on Tuesday approved a $250 million Development Policy Loan (DPL) to Jordan to help manage the global economic downturn and the short-term shocks caused by political unrest in the region.
In a statement posted on its website, the bank said that its Board of Executive Directors discussed the 2012-2015 Country Partnership Strategy for Jordan and approved the loan, which is designed to strengthen transparency and accountability, budget and debt management, efficiency of public spending and services, and private sector development.
The Ministry of Planning and International Cooperation said that the loan agreement is expected to be signed within the coming days and that the amount will be transferred to the treasury after the signing.
On the conditions of the DPL, the ministry said that the maturity period of the loan is 20 years, with a grace period of five years and a low interest rate.
The World Bank and the ministry did not specify the interest rate on the loan.
But in August last year, a World Bank official said the loan will be with an interest rate of 1.25 per cent.
The loan is directed to support the state budget and will reduce the cost of borrowing compared with local and international borrowing.
The WBG is supporting reforms in Jordan designed to improve governance and fiscal management, the statement said.
Among the notable reforms already undertaken to prepare for this financial support are the Cabinet’s approval of a draft law on anti-corruption, an enhanced public-private partnership law, efficiency measures for government health spending and a new investment law establishing greater transparency for transactions and faster acquisition of licences, according to the statement.
“Jordan’s government is embarking on a series of political reforms coupled with the essential growth enhancing reforms needed to urgently boost employment,” said Inger Andersen, World Bank vice president for the Middle East and North Africa Region, as quoted by the press release.
The international financial institution indicated that Jordan’s small and open economy has been buffeted during 2011 by the global shocks of increasing food and fuel prices, and by a sharp fall off in tourism, remittances and foreign direct investment, which dropped by 16 per cent, 3 per cent and 32 per cent respectively due to the changes sweeping the region.
In response to these shocks, social expenditures, including large untargeted subsidies, have increased fiscal deficits and Jordan’s vulnerability to further shocks, the statement elaborated.
The four-year strategy is built around three main themes. The first focuses on strengthening governance through improved fiscal management and increased accountability, also supported by the DPL. The bank will offer guidance on ways to improve public financial management and on increasing the efficiency of public expenditures as well as strengthening mechanisms for both internal and external accountability, according to the WBG statement.
The second theme is designed to boost sustainable growth with a focus on competitiveness.
This encompasses the creation of a more open and efficient business environment and a focus on education quality with a view to making sure Jordanian graduates have the skills sought by the market.
Women’s participation in the labour force in Jordan is low and the bank will support efforts to increase their access to jobs, the statement said.
The third pillar of the strategy looks at reaching more vulnerable citizens, notably in rural areas where the average country poverty rate of 13 per cent can see sharp increases.
Better targeting of social assistance and subsidies is critical to help these more vulnerable communities, the bank said.
The bank is proposing community-based approaches which have worked well elsewhere in the world to help reach those left out, most often women and younger people, the statement explained.
The strategy was designed in consultation with Jordan’s official representatives and with other stakeholders including civil society and the private sector.
For the period of the strategy, the bank’s lending is envisaged at between $500 and $650 million.