Jordan's cash-strapped economy is to contract around 3% in 2020 due to the impact of the coronavirus. This is as government revenue plunges due to a tight lockdown that paralyzed businesses, the finance minister said on Sunday.
The IMF approved a four-year $1.3bn program with the kingdom last March. It expected Jordan's economy to grow around 2.1% in 2020 then gradually rise in the next few years to 3.3%.
"The impact of the big economic blow that hit the local economy is deep and continuous," Mohammad Al Ississ said. This was in a remarks on state television in the first contraction in growth since 1990.
The government has in recent days stepped up moves to return to normality; allowing most businesses to go back to work after a tight nearly two-month lockdown. As the economic impact deepened with mounting fears that layoffs and bankruptcies could trigger social unrest, officials say in private.
Al Ississ said government revenue plunged by $860mn in the year to April compared to the previous year. This pushes a fiscal deficit well beyond a previous forecast of 2.3% of gross domestic product.
"Our revenues dealt a heavy shock. This will lead to the rise in the deficit. However, we know we are in a battle for survival to protect our economy," Al Ississ said. He did not give any estimate of the projected increase.
The crisis will not push the country to scale down public spending in its $14bn budget for 2020, Al Ississ said.
Economists warn that fiscal stability was at stake if the government does not rein in public spending that has expanded rapidly as successive governments sought to appease citizens with state jobs to maintain stability.
State salaries comprise the bulk of state expenditure in a country that has among the world's highest government spending relative to the size of its economy.
The IMF obliges the kingdom to proceed with structural reforms and fiscal consolidation to reduce a $42 billion public debt, equivalent to 97% of gross domestic product that has spiraled in the last decade due to employment in a bloated public sector.
Al Ississ said the government remained committed to repaying its local and foreign debt maturities and state salaries.
"We are committed to paying the installments and servicing of internal and foreign debt and there is no fear over this," he said.
The government would take "deep financial measures" that would illustrate the country's ability to withstand external shocks. Besides, showing donors it was progressing towards much needed reforms, he said.
The government hopes its new IMF deal will help it secure concessional grants and loans at preferential borrowing rates. This is to ease annual debt servicing needed to reduce the debt to GDP ratio, Al Ississ said.
But Al Ississ warned that going to the markets and getting funding from donors might be more difficult in the current climate as Western donors wrestled with their own woes.
"International financial markets have dried up," he said.