Proposal for a DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL providing further macro-financial assistance to the Hashemite Kingdom of Jordan
Date: 2019-09-06
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: EU aid, EU loan, European neighbourhood policy, Jordan, economic reform, economic stabilisation, financial aid, macro-financial assistance

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   EUROPEAN COMMISSION  Brussels, 6.9.2019  COM(2019) 411 final 2019/0192 (COD)  Proposal for a DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL providing further macro-financial assistance to the Hashemite Kingdom of Jordan {SWD(2019) 324 final}  
 
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

In  recent  years,  the  Jordanian  economy  has  been  significantly  affected  by  regional 
unrest, notably in neighbouring Iraq and Syria. This regional unrest has taken a heavy toll 
on  external  receipts  and  has  strained  public  finances.  Lower  tourism  and  foreign  direct 
investment  (FDI)  inflows,  blocked  trade  routes  for  8  years,  and  repeated  disruptions  to  the 
flow of natural gas from Egypt, which forced Jordan to replace gas imports from Egypt with 
more  expensive  fuels  for  electricity  generation,  have  put  a  drag  on  growth  and  weighed  on 
Jordan’s external and fiscal position.  

The Syrian conflict has impacted Jordan not only by disrupting trade with and through Syria 
but  also  by  causing  an  inflow  of  around  1.3  million  of  Syrians  refugees  (according  to 
estimates  from  the Jordanian  authorities)  of  which  660,330  are  registered  with  the  office  of 
the United Nations High Commissioner for Refugees  – UNHCR (data as of 4 august 2019). 
This  large  inflow  of  Syrian  refugees  into  Jordan  has  increased  pressure  on  Jordan’s  fiscal 
position, public services and infrastructure. 

A broadly appropriate policy response and large-scale international support helped the 
country  to  preserve  macroeconomic  stability  and  prevented  an  economic  contraction. 
However, Jordan’s economy remains vulnerable to external shocks. Real growth receded 
to  1.9%  in  2018,  the  lowest  rate  since  1996.  Unemployment  jumped  to  19%  in  early  2019 
while FDI plummeted.  Despite efforts,  fiscal  consolidation  was not sustained at  the initially 
programmed pace, as a result of lower than expected growth, which weakened tax revenues, 
and  the  generation  of  losses  by  the  electricity  company  in  the  absence  of  cost-reflective 
tariffs. Public debt has barely decreased and Jordan remains dependent on foreign aid. Indeed, 
Jordan continues to face considerable external financing needs including payment obligations 
on  Eurobonds  and  other  external  market  borrowing  which  comes  due  in  2020-22.  In  this 
context, continued support from Jordan’s international partners remains essential. 

In  August  2016,  Jordan  and  the  International  Monetary  Fund  (IMF)  agreed  on  a  three-year 
USD  723  million  (150%  of  quota)  Extended  Fund  Facility  (EFF)  which  has  recently  been 
extended  to  March  2020.  This  programme  followed  a  three-year  Stand-By  Arrangement 
(SBA) in the amount of USD 2 billion (800% of quota) which was agreed in August 2012 and 
completed  in  August  2015.  The  IMF  programmes  were  complemented  by  two  Macro-
Financial Assistance (MFA) programmes: the MFA-I, for an amount of EUR 180 million in 
loans, which was adopted by the co-legislators in December 2013 and completed in October 
2015; and the MFA-II, for an amount of EUR 200 million in loans, which was adopted by the 
co-legislators in December 2016, and completed in July 2019.  

The  MFA  programmes  were  part  of  a  wider  effort  by  the  EU  and  other  international 
donors,  agreed  at  the  London  conference  “Supporting  Syria  and  the  region”  in  February 
2016, to help Jordan and other countries in the region mitigate the economic and social impact 
stemming from the regional conflicts and the presence of a large number of Syrian refugees. 
The  international  commitment  towards  Jordan  was  confirmed  on  several  subsequent 
occasions,  notably  during  the  Brussels  Conference  on  “Supporting  the  Future  of  Syria”  in 
April 2017, the EU-Jordan Association Council in July 2017 and the Brussels-II Conference 
on  “Supporting  the  Future  of  Syria”  in  April  2018.  At  the  “London  Initiative”  conference, 
which took place in  February 2019, and at the Brussels-III Conference held in March 2019, 

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the international and regional donor community, including the EU, re-confirmed its intentions 
to  support  Jordan’s  efforts  to  preserve  macroeconomic  stability  and  enhance  growth 
prospects.  

On 11 July 2019, Jordan addressed an official request to the European Commission for 
additional  macro-financial  assistance  from  the  EU  in  the  amount  of EUR  500  million  in 
three  instalments,  as  anticipated  during  the  EU-Jordan  Association  Council  held  in 
Luxembourg  on  26  June  2019.  This  assistance  would  contribute  to  covering  the  country’s 
external financing needs and support reform implementation.  

In light of this request and of the economic situation in Jordan, in particular the emergence of 
additional  external  financing  needs,  the  European  Commission  is  submitting  to  the 
European  Parliament  and  the  Council  a  proposal  to  provide  further  macro-financial 
assistance  (MFA)  to  Jordan,  based  on  Article  212  of  the  TFEU,  for  an  amount  of  up  to 
EUR 500 million,  to  be  provided  in  the  form  of  medium-  to  long-term  loans  in  three 
instalments.  

The  objective  of  the  proposed  MFA  is  to  help  Jordan  cover  part  of  its  additional 
external  financing  needs  in  2020-2021,  reducing  the  economy’s  short-term  balance-of-
payment  and  fiscal  vulnerabilities  as  well  as  contributing  to  the  debt  sustainability.  In 
addition,  the  EU  assistance  would  provide  incentives  to  step  up  Jordan’s  reform  efforts 
through a Memorandum of Understanding, to be agreed with the Jordanian authorities, setting 
out  an  appropriate  package  of  measures  supporting  economic  adjustment  and  structural 
reforms.  These  policy  conditions  would  be  in  line  with  the  reform  commitments  taken  by 
Jordan  in  the  context  of  the  EU-Jordan  Partnership  Priorities  and  other  EU  support 
instruments, as well as the adjustment programmes agreed with the IMF and the World Bank, 
and the Five-Year Reform and Growth Matrix presented at the “London Initiative” conference 
in February 2019.  

As  further  elaborated  in  the  Commission  Staff  Working  Document  accompanying  this 
proposal, and based, among others, on the assessment of the political situation made jointly by 
the  Commission  and  the  European  External  Action  Service  (EEAS),  the  Commission 
considers that the existence of an external financing gap in Jordan, combined with the 
country’s cooperation with the IMF under a disbursing programme, warrants an MFA 
operation from an economic point of view, and that the political pre-conditions for the 
proposed MFA operation are satisfied. 

General context 

The  Jordanian  economy  has  been  particularly  affected  by  the  conflict  in  Syria,  which 
broke out in 2011. Following a period of robust growth averaging 6.2% during 2001-2010, 
Jordan’s GDP growth has decelerated to an average of 2.4% in 2011-2018. While reflecting 
Jordan’s  long-standing  macroeconomic  and  structural  weaknesses  the  economic  slowdown 
was  largely  driven  by  a  series  of  external  shocks  including  the  disruption  of  critical  export 
routes and markets from protracted regional conflicts, the sharp decline in FDI, the hosting of 
large  numbers  of  Syrian  refugees  (1.3  million  according  to  estimates  of  the  Jordanian 
authorities  out  of  which  660,330  are  registered  with  the  UNHCR)  and  rising  oil  prices  and 
borrowing costs reflecting the rise of Fed’s rates. 

The  weakening  of  economic  activity  continued  in  2018,  as  real  GDP  growth  slowed  to 
1.9%  in  2018  (from  2.1%  in  2017)  marking  the  lowest  rate  of  expansion  since  1996. 

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Positively,  tourist  inflows  and  exports  recovered  somewhat  and  two  border  crossings  with 
Iraq  and  Syria  were  reopened  in  2018.  In  the  fourth  quarter  of  2018,  low-cost  gas  imports 
from  Egypt  also  resumed. However, these developments  have  yet  to  manifest  themselves in 
growth figures: in the first quarter of 2019, real GDP increased by 2%, essentially unchanged 
when compared with the pace of recent years.  

Against this background, unemployment rose to 19% in Q1 2019 from 18.4% a year earlier, 
marking  a  significant  upward  trend  since  2014,  when  it  stood  at  12.9%. Unemployment  for 
youth  (38.5%)  and  women  (28.9%)  remains  high  compared  to  unemployment  for  men 
(16.4%). 

Inflation rose to  4.5% in 2018 (from 3.3% at  the end of 2017) reflecting  the increase in  oil 
prices during much of 2018 and the rise of the General  Sales Tax in various basic products 
that was enacted in January. However, in the first four months of 2019 inflation moderated 
to 0.6% as the effect of the tax increases faded away. The Central Bank of Jordan increased 
the  re-discount  rate  in  seven  steps  from  3.75%  to  5.75%  between  February  2017  and 
December  2018.  This  broadly  mirrors  the  Fed’s  rate  rises,  given  the  peg  of  the  Jordanian 
Dinar to the US dollar. The tightening cycle coincided with a gradual yet moderate increase in 
inflation,  as  mentioned  earlier.  In  June  2019,  the  re-discount  rate  remained  unchanged  (at 
5.75%)  as  inflation  declined  and  foreign  exchange  pressures,  which  had  persisted  in  2018, 
eased.  Nevertheless,  in  the  context  of  the  second  review  of  the  IMF  programme,  the 
authorities expressed their readiness to tighten monetary policy, if needed, to ensure reserve 
targets are met. 

Jordan made significant progress  in consolidating its public finances in  the past years, 
but on the back of the weak growth profile and lack of progress in addressing the losses 
of the public electricity and water supply providers, this progress could not be sustained 
in 2018. The overall fiscal deficit (including grants) widened to 3.3% of GDP in 2018 from 
2.2%  of  GDP  in  2017.  The  combined  public  sector  deficit  –  a  fiscal  metric  that  takes  into 
account  the  balance  of  NEPCO  (the  public  electricity  provider)  and  WAJ  (the  Water 
Authority of Jordan) jumped to 4.3% of GDP in 2018 from 2.9% of GDP in 2017, reflecting 
increased cost of oil combined with the absence of cost-reflective tariffs in the electricity and 
water  sectors,  which  encourages  over-consumption.  For  2019,  the  IMF  programme  foresees 
the  reduction  of  the  fiscal  and  of  the  combined  public  sector  deficit  to  2.3%  and  2.6% 
respectively. In the first four months of 2019 the fiscal deficit narrowed to 3% of GDP from 
3.8%  of  GDP  year-on-year.  However,  tax  revenues  declined  by  1.4%  year-on-year  raising 
concerns about the budget execution until the end of 2019. 

At  the  end  of  March  2019,  total  gross  public  debt  stood  at  94.4%  of  GDP,  practically 
unchanged  from  end-2018.  External  public  debt  amounted  to  39.4%  of  GDP,  out  of  which 
72% was denominated in USD, to which the Jordanian Dinar is pegged. While the elevated 
level  of  public  debt  is  a  source  of  vulnerability,  the  IMF  judges  it  to  be  sustainable 
provided  that  the  country  continues  to  deliver  on  fiscal  adjustment  and  growth  enhancing 
reforms  and  that  the  international  and  regional  donor  community  continues  to  provide 
significant support to Jordan, notably in the form of grants and concessional funding. 

With  respect  to  the  external  sector,  Jordan’s  current  account  deficit  narrowed  in  2018  to 
USD  2.9  billion  or  7%  of  GDP  (10.3%  excluding  grants)  from  10.5%  of  GDP  in  the  same 
period in 2017. This reflected a moderate increase in goods exports (which increased by 3.4% 
in value terms), while goods imports decreased (by 1.3% in value terms). In the first quarter 
of  2019,  goods  exports  performed  even  more  strongly,  recording  a  9.3%  increase  in  value 

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terms,  while  goods  imports  decreased  by  3.2%  in  value  terms.  In  the  same  period,  income 
from tourism increased by 6.1% year-on-year while remittances increased only marginally.   

Foreign direct investments (FDI) plummeted to USD 959 million in 2018 (2.2% of GDP), 
down by 52% in US dollar terms compared to 2017. This marked the lowest net FDI inflow 
since  2003.  This  downward  trend  is  consistent  with  the  long-term  weakening  of  FDI  (as  a 
share of GDP) since the Syrian conflict: from an average of 12.7% in 2005-2010 to 4.5% in 
2011-2018.  The  regional  conflict,  which  blocked  trade  routes  for  8  years,  the  economic 
slowdown  in  Gulf  countries,  which  were  Jordan’s  major  investors,  but  also  the  country’s 
structural weaknesses, such as rigid labour markets, constraints to foreign investors and high 
business costs, contributed to the decline of FDI inflows.  

The decline in FDI created further pressures on the capital and financial account, as did 
a  decline  in  public  borrowing  from  around  USD  1  billion  in  2017  to  less  than  USD  500 
million in 2018. These pressures contributed to a sizeable decrease of the commercial banks’ 
net foreign assets (by around USD 900 million) in 2018, partially caused by tighter monetary 
policy  in  neighbouring  countries  and  the  political  instability  in  Jordan  in  mid-2018  (when 
former  Prime  Minister  Mulki  resigned  in  response  to  public  discontent  notably  over  tax 
reform  plans).  Conversely,  a  small  net  inflow  of  USD  41  million  in  private  portfolio 
investments  in  2018  (compared  to  a  large  net  outflow  in  2017),  as  well  as  a  considerable 
increase by around USD 600 million in other investments supported the capital and financial 
account in 2018.  

The current level of reserves – standing at USD 13.2 billion (or 7.1 months of imports) at 
the end of April 2019 – should be increased to make the country more resilient to the above 
factors.  This  is  particularly  important  given  the  vulnerability  of  the  external  position,  the 
elevated  risks  from  regional  conflicts  or  geo-political  tensions,  the  exchange  rate  peg  and 
exposure to oil price shocks.  

Despite the favourable developments in exports and tourism,  a number of macroeconomic 
vulnerabilities  remain.  The  country  continues  to  operate  under  a  difficult  economic 
environment impacted by the protracted regional conflict, the hosting of Syrian refugees, the 
disruption or slow recovery of critical export markets and the marked fall of FDI. As a result, 
economic growth has remained at very low levels, insufficient to reduce high unemployment. 
As happened in 2018, the pace of future fiscal adjustment could be lower than envisaged 
if  growth  weakens  further  and  Jordan  fails  to  mobilise  tax  revenues  through  combating  tax 
evasion  and increasing the capacity of tax administration. The same  could  happen if Jordan 
does  not  achieve  to  restructure  effectively  the  loss-making  state-owned  (electricity  and 
water)  companies,  which  add  to  the  general  government’s  deficit.  In  addition  to  the  above 
risks, borrowing costs of Eurobonds are higher compared with the cost of Jordan’s Eurobonds 
that will mature in the coming years (many of which were US-guaranteed), rendering costly 
the  roll-over  of  the  bonds.  For  the  above  reasons,  the  current  projection  for  the  decline  of 
public debt to 83.7% by 2024 remains fragile and depends on the success of fiscal adjustment 
and  growth-enhancing  reforms  that  the  authorities  have  committed  to  do,  as  well  as  on  the 
their  ability  to  continue  attracting  sizeable  donor  and  market  financing.  Reserves  remain 
below  IMF  adequacy  standards  and  could  come  under  renewed  pressure  in  2020-2021, 
when  the  country  is  expected  to  make  around  USD  3.1  billion  of  payments  (interest  and 
principal)  on  sovereign  and  Eurobonds  external  debt.  In  this  context,  the  further 
replenishment  of  Jordan’s  international  reserves  seems  necessary,  and  the  EU’s  additional 
MFA  could  usefully  support  this  effort,  both  directly  (through  its  disbursements)  and 

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indirectly  (as  a  catalyst  for  private  capital  inflows  and  instilling  confidence  in  the  local 
currency).  

In  conclusion,  Jordan’s  economy  remains  fragile  with  substantial  external  financing 
needs  and  exposed  to  a  number  of  vulnerabilities.  In  this  context,  continued  support 
from the IMF and Jordan’s international partners, including the EU, remains essential.  

• 

Consistency with existing policy provisions in the policy area 

MFA has been provided to Jordan under two separate decisions: 

– 

– 

Decision  No  1351/2013/EU  of  the  European  Parliament  and  of  the  Council  of 
11 December 2013 providing macro-financial assistance to the Hashemite Kingdom 
of Jordan1 

Decision  No  2371/2016/EU  of  the  European  Parliament  and  of  the  Council  of 
14 December  2016  providing  further  macro-financial  assistance  to  the  Hashemite 
Kingdom of Jordan2  

As  both  these  operations  have  been  fully  disbursed,  a  new  Decision  is  required  before  EU 
MFA support to Jordan can continue. 

• 

Consistency with other Union policies 

The  proposed  MFA  is  consistent  with  the  EU’s  commitment  to  support  Jordan’s  economic 
and political situation. It is consistent with the principles governing the use of the instrument 
of  MFA,  including  its  exceptional  character,  political  preconditions,  complementarity, 
conditionality and financial discipline. 

The  proposed  MFA  is  in  line  with  the  objectives  of  the  European  Neighbourhood  Policy 
(ENP).  It  contributes  to  support  the  European  Union’s  objectives  of  economic  stability  and 
development  in  Jordan and, more broadly, resilience in  the South  European neighbourhood. 
By  supporting  the  authorities’  efforts  to  establish  a  stable  macroeconomic  framework  and 
implement ambitious structural reforms, the proposed operation enhances the added value of 
the overall EU involvement in Jordan. It also improves the effectiveness of other forms of EU 
financial assistance to the country – including budget support operations and grants available 
through external financial instruments under the current multiannual financial framework for 
2014-2020. The proposed MFA will also  be an integral  part of overall international  support 
for  Jordan,  including  in  response  to  the  Syrian  crisis,  and  will  continue  to  complement  the 
assistance provided by other multilateral and bilateral donors.  

Jordan is a key partner for the EU due to its important role in promoting stability and inter-
faith tolerance in the Middle East but also due to the hospitality that continues to provide to 
1.3 million of Syrians (out of which 660,330 are registered with the UNHCR).  The EU and 
Jordan  have  a  strong  partnership  across  many  sectors  and  have  been  linked  through  an 
Association  Agreement  which  entered  into  force  in  May  2002.  In  line  with  the  revised 
European  Neighbourhood  Policy,  the  EU  and  Jordan  adopted  in  2016  the  EU-Jordan 
Partnership  Priorities  (which  included  at  that  time  the  EU-Jordan  Compact).  In  December 
2018, the EU-Jordan Partnership Priorities were extended by two more years to cover 2016-
2020.   

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OJ L 341, 18.12.2013, p. 4–9 
O.J. L 352, 23.12.2016, p. 18–25.   

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Cooperation  under  the  Partnership  Priorities  is  structured  around  three  mutually  reinforcing 
objectives:  i)  macroeconomic  stability  and  sustainable  and  knowledge-based  growth;  ii) 
strengthening  democratic  governance,  the  rule  of  law  and  human  rights;  and  iii)  regional 
stability  and  security,  including  counter-terrorism.  Cooperation  is  also  being  pursued  on 
cross-cutting issues such as migration and mobility as well as economic, social and political 
inclusion of vulnerable groups, including youth and women. 

Trade relations between the EU and Jordan are governed by the Association Agreement. This 
agreement established a Free Trade Area opening up two-way trade in goods between the EU 
and Jordan. In July 2016, the EU and Jordan agreed to make more flexible the rules or origin 
that Jordanian exporters use in their trade with the EU. Both sides reviewed and improved this 
initiative in  December 2018. The EU is Jordan’s first trading partner, accounting for 17.1% 
(in value terms) of Jordan’s total trade in 2018. Jordanian exports to the EU amounted to EUR 
300 million in 2018 while imports from the EU amounted to EUR 3.6 billion (in value terms).  

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

The legal basis for this proposal is Article 212 of the TFEU.  

• 

Subsidiarity (for non-exclusive competence)  

is  respected  as 

The  subsidiarity  principle 
the  objectives  of  restoring  short-term 
macroeconomic  stability  in  Jordan  cannot  be  sufficiently  achieved  by  the  Member  States 
alone and can therefore be better achieved by the European Union. The main reasons are the 
budgetary constraints faced at the national level and the need for strong donor coordination in 
order to maximise the scale and effectiveness of the assistance.  

• 

Proportionality 

The  proposal  complies  with  the  proportionality  principle:  it  confines  itself  to  the  minimum 
required in order to achieve the objectives of short-term macroeconomic stability and does not 
go beyond what is necessary for that purpose.  

As  identified  by  the  Commission  based  on  the  estimates  of  the  IMF  in  the  context  of  the 
Extended  Fund  Facility,  the  amount  of  the  assistance  corresponds  to  around  9.7%  of  the 
estimated  residual  financing  gap  for  the  period  2020-2021.  This  significant  commitment  is 
justified  by:  the  political  importance  of  Jordan  for  the  stability  in  the  European 
Neighbourhood; the political association and economic integration of the country with the EU 
as  reflected  by  the  Association  Agreement  between  the  two  sides  that  entered  into  force  on 
1 May  2002;  as  well  as  the  challenging  economic  situation  that  Jordan  continues  to  face, 
notably  as  a  result  of  the  conflicts  in  Syria  and  Iraq  and  the  presence  of  large  numbers  of 
Syrians in the country. 

• 

Choice of the instrument 

Project  finance  or  technical  assistance  would  not  be  suitable  to  address  macroeconomic 
objectives. The key value added of the MFA in comparison to other EU instruments would be 
to  alleviate  the  external  financial  constraint  in  a  swift  manner  and  to  help  create  a  stable 
macroeconomic  framework,  including  by  promoting  a  sustainable  balance  of  payments  and 
budgetary situation, and an appropriate framework for structural reforms. By helping to put in 
place an appropriate framework for macroeconomic and structural policies, MFA can increase 
the  effectiveness  of  the  actions  financed  in  Jordan  under  other,  more  narrowly  focused  EU 
financial instruments.  

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3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Ex-post evaluations/fitness checks of existing legislation 

The Commission’s MFA proposal builds on lessons learned from ex-post evaluations carried 
out  on  past  operations  in  the  EU’s  neighbourhood,  particularly  on  the  ex-post  evaluation  of 
the  MFA-I  operation  provided  to  Jordan  in  2015  that  was  governed  by  Decision 
1351/2013/EU of the European Parliament and of the Council of 11 December 2013.3  

This ex-post evaluation4 concluded that the MFA-I programme met its objectives. Its design 
was  relevant  with  Jordan’s  economic  challenges,  while  it  contributed  substantially  to  the 
effective stabilisation of Jordan’s external  and fiscal  financial  position. The programme had 
considerable  added-value  for  the  EU  as  it  supported  macroeconomic  stability  in  a 
neighbouring partner country and mitigated the impact of the refugee crisis. It was designed 
and implemented in a coherent way to other EU policies or instruments. The programme also 
had a positive social impact while it made an impactful contribution with regard to public debt 
sustainability by offering extremely favourable financing conditions. 

• 

Stakeholder consultations 

In  the  preparation  of  this  proposal  for  MFA,  the  Commission  services  have  been  in  regular 
contact  with  the  Jordanian  authorities,  in  order  to  foster  Jordan’s  ownership  of  the 
programme. Besides, as MFA is provided as an integral part of the international support for 
the  economic  stabilisation  of  Jordan,  the  Commission  has  also  consulted  with  international 
partners of Jordan such  as the  International  Monetary Fund  and the World Bank, which  are 
supporting the country through sizeable financing programmes.  

• 

Collection and use of expertise 

An  Operational  Assessment  verifying  the  quality  and  reliability  of  Jordan’s  public  financial 
circuits and administrative procedures was carried out by the Commission with the assistance 
of  external  experts,  with  the  final  report  prepared  in  September  2016.  A  new  Operational 
Assessment is foreseen to be conducted in the first quarter of 2020 in order to reflect recent 
developments.  

• 

Impact assessment 

The  EU’s  macro-financial  assistance  is  an  exceptional  emergency  instrument  aimed  at 
addressing  severe  balance-of-payment  difficulties  in  third  countries.  Therefore,  this  MFA 
proposal is exempted from the requirement to carry out an Impact Assessment in accordance 
with  the  Commission’s  Better  Regulation  Guidelines  (SWD(2015)  111  final)  as  there  is  a 
political  imperative  to  move  ahead  quickly  in  this  emergency  situation  requiring  a  rapid 
response.  

The MFA will help alleviate Jordan’s short-term financing needs. The economic adjustment 
and  reform  programme  attached,  building  on  the  Jordan  government  5  year  growth  and 
reform matrix, will contribute to create a stable macroeconomic framework and to implement 
ambitious  structural  reforms  that  will  enhance  growth  and  job  creation  prospects.  MFA 
financing will also help the beneficiary country make the necessary economic adjustment less 
harsh and abrupt, compared with an alternative scenario without external financial assistance. 

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4 

OJ L341, 18.12.2013, p. 4 
Ex-Post  Evaluation  available  at:  https://ec.europa.eu/info/evaluation-reports-economic-and-financial-
affairs-policies-and-spending-activities/ex-post-evaluation-mfa-operations-jordan_en 

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In this way, it helps cushion the social impact of the adjustment and avert the adverse effects 
of  the  crisis  that  the  country  is  undergoing.  By  providing  long-term  financing  on  highly 
concessional  terms  and  supporting  reforms,  the  MFA  programme  will  contribute  to  pursue 
fiscal adjustment, enhance Jordan’s debt sustainability and to create the fiscal space necessary 
to  preserve  necessary  social  spending  amid  the  persistent  economic  and  social  pressures 
arising from the challenging regional context, including the presence of around 1.3 million of 
Syrians  according  to  estimates  of  the  Jordanian  authorities  (out  of  which  660,330  were 
registered  with 
targeted  policy 
conditionality, MFA helps to set the conditions for more balanced, sustainable and inclusive 
growth with adequate social protection.   

in  August  2019).  Moreover, 

the  UNHCR 

through 

4. 

BUDGETARY IMPLICATIONS 

The  planned  assistance  would  be  provided  in  the  form  of  loans  and  should  be  financed 
through  borrowing  operations  that  the  Commission  will  conduct  on  behalf  of  the  EU.  The 
budgetary costs of the assistance will correspond to the provisioning, at a rate of 9%, of the 
amounts  disbursed into the Guarantee fund for external  actions of the EU, from  budget  line 
01 03 06 (“Provisioning of the Guarantee Fund”)5.  

Assuming  that  the  first  two  loan  disbursements  will  be  made  in  2020  for  a  total  amount  of 
EUR  300  million  and  the  third    loan  disbursement  in  2021  for  the  amount  of  EUR  200 
million,  and  according  to  the  rules  governing  the  guarantee  fund  mechanism,  the 
corresponding provisioning amounts will be entered in the budgets for 2022 (EUR 27 million) 
and 2023 (EUR 18 million).  

The  Commission  assesses  that  the  budgetary  impact  of  the  proposed  MFA  operation  for 
Jordan can be accommodated within the Commission’s proposal for the next MFF. 

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

The  European  Union  shall  make  MFA  available  to  Jordan  for  a  total  amount  of  up  to 
EUR 500 million, provided in the form of medium- to long-term loans, which will contribute 
to cover Jordan’s residual external financing needs in 2020-21. The assistance is planned to be 
disbursed  in  three  loan  instalments.  The  disbursement  of  the  first  instalment  is  expected  to 
take  place  towards  June  2020.  The  second  and  third  instalment  could  be  disbursed  in  the 
fourth  quarter of 2020 and in  the second quarter of 2021 provided that the policy measures 
attached to each instalment have been implemented in a timely manner.  

The assistance will be managed by the Commission. Specific provisions on the prevention of 
fraud and other irregularities, consistent with the Financial Regulation, are applicable.  

The  Commission  and  the  Jordanian  authorities  would  agree  on  a  Memorandum  of 
Understanding setting out the structural reform measures associated with the proposed MFA 
operation, including aspects of timing and sequencing. Moreover, as is normally the case with 
MFA,  the  disbursements  would  inter  alia  be  conditional  on  satisfactory  reviews  under  the 
IMF programme and the continued drawing by Jordan on IMF funds. 

5  Under the next MFF there will be a new budgetary nomenclature, which is not yet adopted. The provisioning 

will thus take place from the relevant successor line to 01.0306. 

EN 

8 

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The proposal includes a sunset clause. The proposed MFA would be made available for two 
and a half years, starting from the first day after the entry into force of the Memorandum of 
Understanding. 

The  Commission  will  report  yearly  to  the  European  Parliament  and  to  the  Council  on  the 
implementation  of  this  Decision  in  the  preceding  year.  Furthermore,  the  fulfilment  of  the 
objectives of the assistance will be assessed by the Commission, including in the context of an 
ex-post  evaluation  that  the  Commission  shall  submit  to  the  European  Parliament  and  to  the 
Council not later than two years after the expiry of the availability period of the assistance.  

The text of this proposal is consistent with the text of previous MFA Decisions as approved 
by the European Parliament and the Council in recent years. 

EN 

9 

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2019/0192 (COD) 

Proposal for a 

DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

providing further macro-financial assistance to the Hashemite Kingdom of Jordan 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 212 (2) thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national parliaments, 

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

(3) 

the 

framework  of 

(‘Jordan’)  are  developing  within 

Relations between the European Union (‘the Union’) and the Hashemite Kingdom of 
Jordan 
the  European 
Neighbourhood  Policy  (ENP).  Jordan  signed  an  Association  Agreement  with  the 
Union  on  24  November  1997,  which  came  into  force  on  1  May  2002.  Under  the 
Association Agreement, the Union and Jordan gradually established a Free Trade Area 
over  a  transitional  period  of  12  years.  In  addition,  an  agreement  on  further 
liberalisation of agricultural products entered into force in 2007. In 2010, an Advanced 
Status partnership was agreed between the EU and Jordan that entails expanded areas 
of cooperation. A protocol  on Dispute Settlement Mechanisms  for trade between the 
EU and Jordan initialled in December 2009 entered into force on 1 July 2011. Bilateral 
political  dialogue  and  economic  cooperation  have  been  further  developed  within  the 
framework of the Association Agreement, the EU-Jordan Partnership Priorities and the 
Single Support Framework adopted for 2017-2020. 

Since  2011,  Jordan  has  embarked  on  a  number  of  political  reforms  to  strengthen 
parliamentary  democracy  and  the  rule  of  law.  A  Constitutional  Court  and  an 
Independent  Electoral  Commission  have  been  set  up  and  a  number  of  major  laws, 
including  the  Electoral  Act  and  the  Political  Parties  Act  as  well  as  laws  on 
decentralisation  and  municipalities,  have  been  passed  by  the  Jordanian  Parliament. 
Legislative improvements  as regards the independence of the judiciary and women’s 
rights have been adopted. 

The  Jordanian  economy  has  suffered  significantly  from  the  protracted  conflicts, 
notably in neighbouring Iraq and Syria. This regional unrest has taken a heavy toll on 
external  receipts  and  has  strained  public  finances.  Tourism  and  foreign  direct 
investment  inflows  have  been  negatively  affected,  and  trading  routes  have  remained 
blocked for long periods. Separately, the flow of natural gas from Egypt was disrupted 
for several years, giving rise to a need to procure energy from alternative sources at a 
higher cost. In addition, the Jordanian economy has been impacted by a large inflow of 
Syrian  refugees,  which  has  increased  pressure  on  its  fiscal  position,  public  services 
and infrastructure. 

EN 

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(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

6 

In August 2016, the Jordanian authorities and the IMF agreed on a second economic 
adjustment programme supported by a three-year Extended Fund Facility (EFF) in the 
amount  of  USD  723  million,  which  followed  a  USD  2  billion  three-year  Stand-by 
Arrangement  running  from  2012  to  2015.  In  May  2019,  the  EFF  programme  was 
extended until March 2020.  
In  December  2016,  the  Union  adopted6  a  second  programme  of  macro-financial 
assistance (MFA-II) of EUR 200 million in the form of loans, in response to a request 
from Jordan in March 2016 and following the completion of a first MFA programme 
of  EUR  180  million  implemented  in  2015.  MFA-II  came  as  a  follow-up  to  the 
commitment expressed at the conference “Supporting Syria and the Region”, held in 
London on 4 February 2016, where the Union pledged EUR 2.39 billion in 2016-2017 
in  financial  support  for  the  countries  most  affected  by  the  refugee  crisis,  including 
Jordan. The Memorandum of Understanding defining the policy conditions related to 
MFA-II entered into force on 19 September 2017. The first instalment of MFA-II was 
released on 17 October 2017 and the second instalment on 21 June 2019, following the 
implementation of the agreed policy measures. 

The  Decision  for  MFA-II,  as  adopted  by  the  co-legislators  in  December  2016, 
included  a  Joint  Statement  by  the  European  Parliament,  the  Council  and  the 
Commission  in  which  the  Commission,  in  light  of  the  fiscal  challenges  and 
extraordinary  circumstances  Jordan  faces  as  a  result  of  hosting  large  numbers  of  
Syrians  (1.3  million  according  to  the  Jordanian  authorities),  committed  to  submit,  if 
appropriate,  a  new  proposal  for  extending  and  increasing  MFA  to  Jordan,  upon  the 
successful  conclusion  of  the  second  MFA  and  provided  that  the  usual  preconditions 
for  this  type  of  assistance,  including  an  updated  assessment  by  the  Commission  of 
Jordan’s external financing needs, are met. 

In  2017-2019,  the  protracted  regional  instability,  high  exposure  to  fluctuation  of  oil 
prices and the increase of borrowing costs for emerging markets globally continued to 
weigh  on  the  Jordanian  economy.  As  a  result,  economic  growth  slowed  again, 
unemployment increased significantly, tax revenues collections fell and new fiscal and 
external financing needs emerged.  

In  this  challenging  context,  the  Union  and  the  international  community  expressed 
again the commitment to supporting Jordan on several subsequent occasions, notably 
during the Brussels Conference on “Supporting the Future of Syria” in April 2017, the 
EU-Jordan  Association  Council  in  July  2017  and  the  Brussels-II  Conference  on 
“Supporting the Future of Syria” in April 2018. At the “London Initiative” conference, 
which took place in February 2019, and at the Brussels-III Conference held in March 
2019, the international and regional donor community, including the EU, re-confirmed 
its  intentions  to  support  Jordan’s  efforts  to  preserve  macroeconomic  stability  and 
enhance growth prospects.   

Since the beginning of the Syrian crisis in 2011, the Union has made available more 
than  EUR  2.1  billion  to  Jordan  under  different  instruments  (including  EUR  380 
million under the two aforementioned MFA programmes) to help the country preserve 
economic  stability,  sustain  political  and  economic  reform  and  address  its  related 

Decision  No  2371/2016/EU  of  the  European  Parliament  and  of  the  Council  of  14  December  2016 
providing  further  macro-financial  assistance  to  the  Hashemite  Kingdom  of  Jordan  (O.J.  L  352, 
23.12.2016, p. 18–25). 

EN 

11 

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humanitarian, development  and security needs.  In addition,  the European  Investment 
Bank has allocated around EUR 486 million in project loans to Jordan.   

(10) 

In  July  2019,  in  view  of  the  still  difficult  economic  situation  and  outlook,  Jordan 
requested additional macro-financial assistance from the Union. 

(11)  Following the successful completion of the second IMF programme review on 6 May 
2019  the  IMF  and  Jordan  have  started  discussions  on  a  successor  IMF  programme 
beyond  March  2020  when  the  arrangement  under  the  Extended  Fund  Facility  is 
expected to be completed.   

(12)  Given  that  Jordan  is  a  country  covered  by  the  ENP,  it  should  be  considered  to  be 

eligible to receive macro-financial assistance from the Union. 

(13)  The Union’s macro-financial assistance should be an exceptional financial instrument 
of untied and undesignated balance-of-payments support, which aims at addressing the 
beneficiary’s 
the 
implementation  of  a  policy  programme  containing  strong  immediate  adjustment  and 
structural  reform  measures  designed  to  improve  the  balance-of-payments  position  in 
the short term. 

immediate  external  financing  needs  and  should  underpin 

(14)  Given that a residual financing gap remains in Jordan’s balance of payments over and 
above the resources provided by IMF and other multilateral institutions, the provision 
by the Union of macro-financial assistance to Jordan is, under the current exceptional 
circumstances,  considered  to  be  an  appropriate  response  to  Jordan’s  request  to  the 
Union to support its economic stabilisation, in conjunction with the IMF programme. 
The Union’s macro-financial assistance would support the economic stabilisation and 
the structural reform agenda of Jordan, supplementing resources made available under 
the IMF’s financial arrangement.  

(15)  The  Union’s  macro-financial  assistance  should  aim  to  support  the  restoration  of  a 
sustainable external financing situation for Jordan thereby supporting its economic and 
social development. 

(16)  The determination of the amount of the Union’s macro-financial assistance is based on 
a complete quantitative assessment of Jordan’s residual external financing needs, and 
takes into account its capacity to finance itself with its own resources, in particular the 
international  reserves  at  its  disposal.  The  Union’s  macro-financial  assistance  should 
complement the programmes and resources provided by the IMF and the World Bank. 
The  determination  of  the  amount  of  the  assistance  also  takes  into  account  expected 
financial  contributions  from  bilateral  and  multilateral  donors  and  the  need  to  ensure 
fair  burden  sharing  between  the  Union  and  other  donors,  as  well  as  the  pre-existing 
deployment  of  the  Union’s  other  external  financing  instruments  in  Jordan  and  the 
added value of the overall Union involvement.  

(17)  The Commission should ensure that the Union’s macro-financial assistance is legally 
and  substantially  in  accordance  with  the  key  principles  and  objectives,  and  of  the 
measures taken within, the different areas of external action and other relevant Union 
policies. 

(18)  The  Union’s  macro-financial  assistance  should  support  the  Union’s  external  policy 
towards  Jordan.  Commission  services  and  the  European  External  Action  Service 
should  work  closely  together  throughout  the  macro-financial  assistance  operation  in 
order to coordinate, and to ensure the consistency of, Union external policy. 

EN 

12 

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(19)  The Union’s macro-financial assistance should support Jordan’s commitment to values 
shared with the Union, including democracy, the rule of law, good governance, respect 
for  human  rights,  sustainable  development  and  poverty  reduction,  as  well  as  its 
commitment to the principles of open, rule-based and fair trade. 

(20)  A  pre-condition  for  granting  the  Union’s  macro-financial  assistance  should  be  that 
Jordan  respects  effective  democratic  mechanisms  – 
including  a  multi-party 
parliamentary system – and the rule of law, and guarantees respect for human rights. 
In  addition,  the  specific  objectives  of  the  Union’s  macro-financial  assistance  should 
strengthen  the  efficiency,  transparency  and  accountability  of  the  public  finance 
management  systems  in  Jordan  and  promote  structural  reforms  aimed  at  supporting 
sustainable and inclusive growth, employment creation and fiscal consolidation. Both 
the fulfilment of the preconditions and the achievement of those objectives should be 
regularly monitored by the Commission and the European External Action Service. 

(21) 

In  order  to  ensure  that  the  Union’s  financial  interests  linked  to  the  Union’s  macro-
financial assistance are protected efficiently, Jordan should take appropriate measures 
relating  to  the  prevention  of,  and  fight  against,  fraud,  corruption  and  any  other 
irregularities  linked  to  the  assistance.  In  addition,  provision  should  be  made  for  the 
Commission to carry out checks and for the Court of Auditors to carry out audits. 

(22)  Release of the Union’s  macro-financial assistance is  without prejudice to  the powers 

of the European Parliament and the Council (as budgetary authority).  

(23)  The  amounts  of  provisioning  required  for  the  Union’s  macro-financial  assistance 
should  be  consistent  with  the  budgetary  appropriations  provided  for  in  the  multi-
annual financial framework. 

(24)  The  Union’s  macro-financial  assistance  should  be  managed  by  the  Commission.  In 
order  to  ensure  that  the  European  Parliament  and  the  Council  are  able  to  follow  the 
implementation  of  this  Decision,  the  Commission  should  regularly  inform  them  of 
developments relating to the assistance and provide them with the relevant documents. 

(25) 

In  order  to  ensure  uniform  conditions  for  the  implementation  of  this  Decision, 
implementing powers should be conferred on the Commission. Those powers should 
be  exercised  in  accordance  with  Regulation  (EU)  No 182/2011  of  the  European 
Parliament and of the Council7. 

(26)  The  Union’s  macro-financial  assistance  should  be  subject  to  economic  policy 
conditions,  to  be  laid  down  in  a  Memorandum  of  Understanding.  In  order  to  ensure 
uniform conditions of implementation and for reasons of efficiency, the Commission 
should  be  empowered  to  negotiate  such  conditions  with  the  Jordanian  authorities 
under  the  supervision  of  the  committee  of  representatives  of  the  Member  States  in 
accordance  with  Regulation  (EU)  No 182/2011.  Under  that  Regulation,  the  advisory 
procedure should, as a general rule, apply in all cases other than as provided for in that 
Regulation.  Considering  the  potentially  important  impact  of  assistance  of  more  than 
EUR  90  million,  it  is  appropriate  that  the  examination  procedure  be  used  for 
operations  above  that  threshold.  Considering  the  amount  of  the  Union’s  macro-
financial assistance to Jordan, the examination procedure should apply to the adoption 

7 

Regulation  (EU)  No  182/2011  of  the  European  Parliament  and  of  the  Council  of  16  February  2011 
laying down the rules and general principles concerning mechanisms for control by Member States of 
the Commission’s exercise of implementing powers (OJ L 55, 28.2.2011, p. 13). 

EN 

13 

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of  the  Memorandum  of  Understanding,  and  to  any  reduction,  suspension  or 
cancellation of the assistance, 

HAVE ADOPTED THIS DECISION: 

1. 

2. 

3. 

4. 

5. 

1. 

2. 

Article 1 

The  Union  shall  make  macro-financial  assistance  of  a  maximum  amount  of 
EUR 500 million  available  to  Jordan  (“the  Union’s  macro-financial  assistance”), 
with  a view to  supporting Jordan’s economic stabilisation and a substantive reform 
agenda.  The  assistance  shall  contribute  to  covering  Jordan’s  balance  of  payments 
needs as identified in the IMF programme.  

The  full  amount  of  the  Union’s  macro-financial  assistance  shall  be  provided  to 
Jordan in the form of loans. The Commission shall be empowered on behalf of the 
Union  to  borrow  the  necessary  funds  on  the  capital  markets  or  from  financial 
institutions and to on-lend them to Jordan. The loans shall have a maximum average 
maturity of 15 years. 

The  release  of  the  Union’s  macro-financial  assistance  shall  be  managed  by  the 
Commission in a manner consistent with the agreements or understandings reached 
between  the  International  Monetary  Fund  (IMF)  and  Jordan,  and  with  the  key 
principles and objectives of economic reforms set out in the EU-Jordan Association 
Agreement. 

The Commission shall regularly inform the European Parliament and the Council of 
developments 
including 
disbursements  thereof,  and  shall  provide  those  institutions  with  the  relevant 
documents in due time. 

the  Union’s  macro-financial  assistance, 

regarding 

The Union’s macro-financial assistance shall be made available for a period of two 
and  a  half  years,  starting  from  the  first  day  after  the  entry  into  force  of  the 
Memorandum of Understanding referred to in Article 3(1). 

If  the  financing  needs  of  Jordan  decrease  fundamentally  during  the  period  of  the 
disbursement  of  the  Union’s  macro-financial  assistance  compared  to  the  initial 
projections,  the  Commission,  acting  in  accordance  with  the  examination  procedure 
referred  to  in  Article 7(2),  shall  reduce  the  amount  of  the  assistance  or  suspend  or 
cancel it. 

Article 2 

A  pre-condition  for  granting  the  Union’s  macro-financial  assistance  shall  be  that 
Jordan  respects  effective  democratic  mechanisms  –  including  a  multi-party 
parliamentary system – and the rule of law, and guarantees respect for human rights. 

The  Commission  and  the  European  External  Action  Service  shall  monitor  the 
fulfilment  of  this  pre-condition  throughout  the  life-cycle  of  the  Union’s  macro-
financial assistance.  

EN 

14 

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3. 

1. 

2. 

3. 

4. 

1. 

2. 

3. 

8 

9 

Paragraphs  1  and  2  of  this  Article  shall  be  applied  in  accordance  with  Council 
Decision 2010/427/EU8. 

Article 3 

The  Commission,  in  accordance  with  the  examination  procedure  referred  to  in 
Article 7(2),  shall  agree  with  the Jordanian  authorities  on  clearly  defined  economic 
policy  and  financial  conditions,  focusing  on  structural  reforms  and  sound  public 
finances, to which the Union’s macro-financial assistance is to be subject, to be laid 
down  in  a  Memorandum  of  Understanding  (“the  Memorandum  of  Understanding”) 
which shall include a timeframe for the fulfilment of those conditions. The economic 
policy and financial conditions set out in the Memorandum of Understanding shall be 
consistent  with  the  agreements  or  understandings  referred  to  in  Article 1(3), 
including  the  macroeconomic  adjustment  and  structural  reform  programmes 
implemented by Jordan with the support of the IMF.  

The  conditions  referred  to  in  paragraph  1  shall  aim,  in  particular,  at  enhancing  the 
efficiency,  transparency  and  accountability  of  the  public  finance  management 
systems  in  Jordan,  including  for  the  use  of  the  Union’s  macro-financial  assistance. 
Progress  in  mutual  market  opening,  the  development  of  rules-based  and  fair  trade, 
and  other  priorities  in  the  context  of  the  Union’s  external  policy  shall  also  be  duly 
taken into account  when designing the policy measures. Progress  in  attaining those 
objectives shall be regularly monitored by the Commission.  

The detailed financial terms of the  Union’s macro-financial  assistance shall be laid 
down  in  a  Loan  Agreement  to  be  concluded  between  the  Commission  and  the 
Jordanian authorities.  

The  Commission  shall  verify,  at  regular  intervals,  that  the  conditions  referred  to  in 
Article 4(3)  continue  to  be  met,  including  whether  the  economic  policies  of  Jordan 
are in accordance with the objectives of the Union’s macro-financial assistance. In so 
doing, the Commission shall coordinate closely  with  the  IMF and the World  Bank, 
and, where necessary, with the European Parliament and the Council. 

Article 4 

Subject  to  the  conditions  referred  to  in  paragraph 3,  the  Union’s  macro-financial 
assistance shall be made available by the Commission in three loan instalments. The 
size  of  each  instalment  shall  be  laid  down  in  the  Memorandum  of  Understanding 
referred to in Article 3.  

The amounts  of the Union’s macro-financial assistance shall be provisioned, where 
required, in accordance with Council Regulation (EC, Euratom) No 480/2009.9  

The  Commission  shall  decide  on  the  release  of  the  instalments  subject  to  the 
fulfilment of all of the following conditions: 

(a) 

the pre-condition set out in Article 2; 

Council  Decision  2010/427/EU  of  26 July  2010  establishing  the  organisation  and  functioning  of  the 
European External Action Service (OJ L 201, 3.8.2010, p. 30). 

Council  Regulation  (EC,  Euratom)  No 480/2009  of  25 May  2009  establishing  a  Guarantee  Fund  for 
external actions (OJ L 145, 10.6.2009, p. 10). 

EN 

15 

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(b) 

a  continuous  satisfactory  track  record  of  implementing  a  policy  programme 
that contains strong adjustment and structural reform measures supported by a 
non-precautionary IMF credit arrangement; and 

(c) 

the  satisfactory  implementation  of  the  economic  policy  and  financial 
conditions agreed in the Memorandum of Understanding. 

The  release  of  the  second  instalment  shall  not,  in  principle,  take  place  earlier  than 
three  months  after  the  release  of  the  first  instalment.  The  release  of  the  third 
instalment shall not, in principle, take place earlier than three months after the release 
of the second instalment. 

Where the conditions referred to in the first subparagraph of paragraph 3 are not met, 
the Commission shall temporarily suspend or cancel the disbursement of the Union’s 
macro-financial  assistance.  In  such  cases,  it  shall  inform  the  European  Parliament 
and the Council of the reasons for the suspension or cancellation.  

The  Union’s  macro-financial  assistance  shall  be  disbursed  to  the  Central  Bank  of 
Jordan. Subject to the provisions to be agreed in the Memorandum of Understanding, 
including a confirmation of residual budgetary financing needs, the Union funds may 
be transferred to the Jordanian Ministry of Finance as the final beneficiary.  

Article 5 

The  borrowing  and  lending  operations  related  to  the  Union’s  macro-financial 
assistance shall be carried out in euro using the same value date and shall not involve 
the Union in the transformation of maturities, or expose it to any exchange or interest 
rate risk, or to any other commercial risk. 

Where the circumstances permit, and if Jordan so requests, the Commission may take 
the steps necessary to ensure that an early repayment clause is included in the loan 
terms  and  conditions  and  that  it is  matched  by  a  corresponding  clause  in  the  terms 
and conditions of the borrowing operations.  

Where  circumstances  permit  an  improvement  of  the  interest  rate  of  the  loan  and  if 
Jordan so requests, the Commission may decide to refinance all or part of its initial 
borrowings or may restructure the corresponding financial conditions. Refinancing or 
restructuring operations  shall be carried out  in  accordance  with  paragraphs 1 and 4 
and shall not have the effect of extending the maturity of the borrowings concerned 
or  of  increasing  the  amount  of  capital  outstanding  at  the  date  of  the  refinancing  or 
restructuring.  

All costs incurred by the Union which relate to the borrowing and lending operations 
under this Decision shall be borne by Jordan. 

The  Commission  shall  inform  the  European  Parliament  and  the  Council  of 
developments in the operations referred to in paragraphs 2 and 3. 

4. 

5. 

1. 

2. 

3. 

4. 

5. 

EN 

16 

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Article 6 

1. 

2. 

3. 

The  Union’s  macro-financial  assistance  shall  be  implemented  in  accordance  with 
Regulation  (EU,  Euratom)  No 1046/2018  of  the  European  Parliament  and  of  the 
Council10. 

The  Union’s  macro-financial  assistance  shall  be 
management.  

implemented  under  direct 

The Loan Agreement referred to in Article 3(3) shall contain provisions:  

(a) 

(b) 

(c) 

(d) 

(e) 

ensuring that Jordan regularly checks that financing provided from the budget 
of  the  Union  has  been  properly  used,  takes  appropriate  measures  to  prevent 
irregularities  and  fraud,  and,  if  necessary,  takes  legal  action  to  recover  any 
funds provided under this Decision that have been misappropriated; 

ensuring  the  protection  of  the  Union’s  financial  interests,  in  particular 
providing  for  specific  measures  in  relation  to  the  prevention  of,  and  fight 
against,  fraud,  corruption  and  any  other  irregularities  affecting  the  Union’s 
macro-financial  assistance,  in  accordance  with  Council  Regulation  (EC, 
Euratom) No 2988/9511, Council Regulation (EC, Euratom) No 2185/9612 and 
Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the 
Council13.  Notably,  to  that  end,  the  European  Anti-Fraud  Office  shall  be 
expressly authorised to carry out investigations, including in particular on-the-
spot  checks  and  inspections  including  digital  forensic  operations  and 
interviews;  

expressly  authorising  the  Commission  (OLAF),  or  its  representatives  to  carry 
out checks, including on-the-spot checks and inspections;  

expressly  authorising  the  Commission  and  the  Court  of  Auditors  to  perform 
audits  during  and  after  the  availability  period  of  the  Union’s  macro-financial 
assistance,  including  document  audits  and  on-the-spot  audits,  such  as 
operational assessments; 

ensuring that the Union is entitled to early repayment of the loan where it has 
been  established  that,  in  relation  to  the  management  of  the  Union’s  macro-
financial  assistance,  Jordan  has  engaged  in  any  act  of  fraud  or  corruption  or 
any other illegal activity detrimental to the financial interests of the Union. 

(f) 

ensuring that all costs incurred by the Union that relate to a financial assistance 
shall be borne by Jordan. 

10 

11 

12 

13 

Regulation  (EU,  Euratom)  No 1046/2018  of  the  European  Parliament  and  of  the  Council  of  18  July 
2018 on the financial rules applicable to the general budget of the Union and repealing Regulation (EU, 
Euratom) No 966/2012 (OJ L 193, 30.07.2018, p. 1). 

Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European 
Communities financial interests (OJ L 312, 23.12.1995, p. 1). 

Council  Regulation  (EC,  Euratom)  No 2185/96  of  11 November  1996  concerning  on-the-spot  checks 
and inspections carried out by the  Commission to protect the Communities’ financial interests against 
fraud and other irregularities (OJ L 292, 15.11.1996, p. 2). 

Regulation  (EU,  Euratom)  No 883/2013  of  the  European  Parliament  and  of  the  Council  of 
11 September  2013  concerning  investigations  conducted  by  the  European  Anti-Fraud  Office  (OLAF) 
and  repealing  Regulation  (EC)  No 1073/1999  of  the  European  Parliament  and  of  the  Council  and 
Council Regulation (Euratom) No 1074/1999 (OJ L 248, 18.9.2013, p. 1). 

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4. 

1. 

2. 

1. 

2. 

the 

implementation  of 

Before 
the 
Commission  shall  assess,  by  means  of  an  operational  assessment,  the  soundness  of 
Jordan’s financial arrangements, the administrative procedures, and the internal and 
external control mechanisms which are relevant to the assistance. 

the  Union’s  macro-financial  assistance, 

Article 7 

The  Commission  shall  be  assisted  by  a  committee.  That  committee  shall  be  a 
committee within the meaning of Regulation (EU) No 182/2011. 

Where  reference  is  made  to  this  paragraph,  Article  5  of  Regulation  (EU)  No 
182/2011 shall apply. 

Article 8 

By  30 June  of  each  year,  the  Commission  shall  submit  to  the  European  Parliament 
and to the Council a report on the implementation of this Decision in the preceding 
year, including an evaluation of that implementation. The report shall: 

(a) 

(b) 

(c) 

examine  the  progress  made  in  implementing  the  Union’s  macro-financial 
assistance; 

assess  the  economic  situation  and  prospects  of  Jordan,  as  well  as  progress 
made in implementing the policy measures referred to in Article 3(1); 

indicate the  connection  between the economic policy  conditions  laid down in 
the  Memorandum  of  Understanding,  Jordan’s  on-going  economic  and  fiscal 
performance and the Commission’s decisions to release the instalments of the 
Union’s macro-financial assistance. 

Not  later  than  two  years  after  the  expiry  of  the  availability  period  referred  to  in 
Article 1(4),  the  Commission  shall  submit  to  the  European  Parliament  and  to  the 
Council  an  ex-post  evaluation  report,  assessing  the  results  and  efficiency  of  the 
completed  Union’s  macro-financial  assistance  and  the  extent  to  which  it  has 
contributed to the aims of the assistance. 

Article 9 

This  Decision  shall  enter  into  force  on  the  third  day  following  that  of  its  publication  in  the 
Official Journal of the European Union 

Done at Brussels, 

For the European Parliament 
The President 

For the Council 
The President 

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LEGISLATIVE FINANCIAL STATEMENT 

1. 

FRAMEWORK OF THE PROPOSAL/INITIATIVE  

1.1.  Title of the proposal/initiative  

1.2.  Policy area(s) concerned 

1.3.  The proposal/initiative relates to  

1.4.  Objective(s)  

1.4.1. General objective(s) 

1.4.2. Specific objective(s) 

1.4.3. Expected result(s) and impact 

1.4.4. Indicators of performance 

1.5.  Grounds for the proposal/initiative  

1.5.1. Requirement(s)  to  be  met  in  the  short  or  long  term  including  a  detailed 
timeline for roll-out of the implementation of the initiative 

1.5.2. Added  value  of  Union  involvement  (it  may  result  from  different  factors,  e.g. 
coordination gains, legal certainty, greater effectiveness or complementarities). For 
the purposes of this point 'added value of Union involvement' is the value resulting 
from  Union  intervention  which  is  additional  to  the  value  that  would  have  been 
otherwise created by Member States alone. 

1.5.3. Lessons learned from similar experiences in the past 

1.5.4. Compatibility  with  the  Multiannual  Financial  Framework  and  possible 
synergies with other appropriate instruments 

1.5.5. Assessment  of  the  different  available  financing  options,  including  scope  for 
redeployment 

1.6.  Duration and financial impact of the proposal/initiative 

1.7.  Management mode(s) planned 

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2. 

MANAGEMENT MEASURES  

2.1.  Monitoring and reporting rules  

2.2.  Management and control system(s) 

2.2.1. Justification  of 
mechanism(s), the payment modalities and the control strategy proposed 

the  management  mode(s), 

funding 

the 

implementation 

2.2.2. Information  concerning the risks identified and the internal control  system(s) 
set up to mitigate them 

2.2.3. Estimation  and  justification  of  the  cost-effectiveness  of  the  controls  (ratio  of 
"control  costs  ÷  value  of  the  related  funds  managed"),  and  assessment  of  the 
expected levels of risk of error (at payment & at closure) 

2.3.  Measures to prevent fraud and irregularities  

3. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE  

3.1.  Heading(s)  of  the  multiannual  financial  framework  and  expenditure  budget 
line(s) affected  

3.2.  Estimated financial impact of the proposal on appropriations 

3.2.1. Summary of estimated impact on operational appropriations  

3.2.2. Estimated output funded with operational appropriations  

3.2.3. Summary of estimated impact on administrative appropriations 

3.2.4. Compatibility with the current multiannual financial framework 

3.2.5. Third-party contributions  

3.3.  Estimated impact on revenue 

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LEGISLATIVE FINANCIAL STATEMENT 

1. 

FRAMEWORK OF THE PROPOSAL/INITIATIVE  

1.1. 

Title of the proposal/initiative 

Macro-financial assistance to the Hashemite Kingdom of Jordan 

1.2. 

Policy area(s) concerned  

Policy area:  Economic and Financial Affairs 

Activity: 

International economic and financial affairs 

The proposal/initiative relates to a new action  

Objective(s) 

1.3. 

1.4. 

1.4.1.  General objective(s) 

“A new boost for jobs, growth and investment: promoting prosperity beyond the EU” 

1.4.2. 

Specific objective(s) 

“Promoting prosperity beyond the EU” 

The DG ECFIN related activities pertain to:  

(a)  Supporting macro-financial stability and promoting growth-enhancing reforms 
outside  the  EU,  including  through  regular  economic  dialogues  with  key 
partners and by providing macro-financial assistance; and  

(b)  Supporting 

the  enlargement  process, 

the  EU 
Neighbourhood Policy and EU priorities in other third countries by conducting 
economic analysis and providing policy assessments and advice.  

implementation  of 

the 

1.4.3.  Expected result(s) and impact 

The proposed assistance consists of an EU loan of up to EUR 500 million to Jordan, 
with a view to contributing to a more sustainable balance-of-payments situation. The 
assistance, to be disbursed in three instalments, should help the country overcome its 
difficult economic and balance-of-payments situation. It will also promote structural 
reforms aimed at raising sustainable economic growth and improving public finance 
management.  Moreover,  by  providing  long-term  financing  on  highly  concessional 
terms,  the  MFA  programme  will  also  contribute  to  enhancing  Jordan’s  debt 
sustainability, while helping the country to preserve necessary social spending amid 
the  persistent  economic  and  social  pressures  arising  from  the  challenging  regional 
context, including the presence of large numbers of Syrians (estimated to 1.3 million 
by the Jordanian government out of which 660,330 registered in the UNHCR, data as 
of 4 August 2019). The MFA programme will highlight the EU's solidarity with and 
confidence in Jordan, as well as Jordan's geo-political importance for the EU in the 
context of the Syrian crisis.  

1.4.4. 

Indicators of performance 

The  authorities  will  be  required  to  report  on  a  set  of  economic  indicators  to  the 
Commission services on a regular basis and provide a comprehensive report on the 
compliance  with  the  agreed  policy  conditions  ahead  of  the  disbursement  of  the 
instalments of the assistance.  

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The  Commission  services  will  continue  to  monitor  public  finance  management, 
following  the  operational  assessment  of  the  financial  circuits  and  administrative 
procedures in Jordan that would be carried out in the first quarter of 2020. The EU 
Delegation  in  Jordan  will  also  provide  regular  reporting  on  issues  relevant  for  the 
monitoring of the assistance. The Commission services will remain in close contact 
with the IMF and the World Bank to benefit from their insights from their on-going 
activities in Jordan.  

An annual report to the Council and European Parliament is foreseen in the proposed 
legislative decision, including an assessment of the implementation of this operation. 
An  independent  ex-post  evaluation  of  the  assistance  will  be  carried  out  within  two 
years after the expiry of the implementation period. 

1.5. 

Grounds for the proposal/initiative  

1.5.1.  Requirement(s) to be met in the short or long term including a detailed timeline for 

roll-out of the implementation of the initiative 

The  disbursement  of  the  assistance  will  be  conditional  on  the  fulfilment  of  the 
political  pre-condition  and  a  satisfactory  track  record  in  the  implementation  of  a 
financing  arrangement  between  Jordan  and  the  IMF.  In  addition,  the  Commission 
shall  agree  with  the  Jordanian  authorities  on  specific  policy  conditions,  listed  in  a 
Memorandum of Understanding.  

The assistance is planned to be disbursed in three loan instalments. The disbursement 
of the first instalment is expected to take place towards June 2020. The second and 
third instalment  could  be disbursed in  the fourth  quarter of 2020 and in  the second 
quarter of 2021 provided that the policy measures attached to each instalment have 
been implemented in a timely manner. 

1.5.2.  Added  value  of  Union  involvement  (it  may  result  from  different  factors,  e.g. 
coordination gains, legal certainty, greater effectiveness or complementarities). For 
the purposes of this point 'added value of Union involvement' is the value resulting 
from  Union  intervention  which  is  additional  to  the  value  that  would  have  been 
otherwise created by Member States alone. 

The  proposed  MFA  to  Jordan  reflects  the  country’s  strategic  importance  to  the  EU 
and is in line with the objectives of the European Neighbourhood Policy (ENP). The 
MFA  instrument  is  a  policy-based  instrument  that  aims  to  alleviate  short-  and 
medium-term  external  financial  needs.  As  a  part  of  the  overall  EU  package  of 
assistance,  it  would  contribute  to  supporting  the  Union’s  objectives  of  economic 
stability,  economic  development  and  resilience  in  Jordan  and,  more  broadly,  in  the 
South European neighbourhood. 

The  MFA  programme  will  highlight  the  EU's  solidarity  with  and  confidence  in 
Jordan, as well as Jordan's geo-political importance for the EU in the context of the 
Syrian crisis. This is consistent with EU’s commitments towards Jordan as expressed 
on several occasions in recent years including in the London Initiative conference in 
February 2019 and in the Brussels III conference in March 2019.  

By  supporting  the  Jordan  authorities’  efforts  to  establish  a  stable  macroeconomic 
framework  and  implement  ambitious  structural  reforms,  the  proposed  operation 
enhances the added value of the overall EU involvement in Jordan and improves the 
effectiveness  of  other  forms  of  EU  financial  assistance  to  the  country,  including 
budget  support  operations  and  grants,  available 
through  external  financial 
instruments under the current multiannual financial framework for 2014-2020.  

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In  addition  to  the  financial  impact  of  the  MFA,  the  proposed  programme  will 
strengthen  the  government’s  reform  commitment  and  further  foster  its  aspiration 
towards closer relations with the EU, as reflected by the Association Agreement that 
entered into force in May 2002 and the Partnership Priorities with the EU that have 
been in force since 2016. This result will be achieved, inter alia, through appropriate 
conditionality  for  the  disbursement  of  the  assistance.  In  a  larger  context,  the 
programme  will  signal  to  the  other  countries  in  the  region  that  the  EU  is  ready  to 
support countries embarking on a clear path towards economic reforms. 

The proposed MFA is also an integral part of overall international support for Jordan 
and  will  continue  to  complement  the  assistance  provided  by  other  multilateral  and 
bilateral  donors.  By  complementing  the  resources  made  available  by  the  IFIs  and 
other  donors,  EU  MFA  contributes  to  the  overall  effectiveness  of  the  financial 
support  agreed  by  the  international  donor  community.  Furthermore,  by  providing 
long-term  financing  on  highly  concessional  terms,  usually  lower  than  the  other 
multilateral  or  bilateral  donors,  the  MFA  programme  will  contribute  to  enhancing 
Jordan’s  debt  sustainability,  while  helping  the  country  to  preserve  necessary  social 
spending  amid  the  persistent  economic  and  social  pressures  arising  from  the 
challenging regional context. MFA  conditions  will also  help  fostering a sustainable 
balance  of  payments  and  budgetary  position,  raising  potential  growth,  promoting 
integration and regulatory convergence with the EU and strengthening public finance 
management. 

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1.5.3.  Lessons learned from similar experiences in the past 

Since  2004,  eighteen  ex-post  evaluations  have  been  carried  out  on  macro-financial 
assistance  operations.  These  evaluations  conclude 
that  MFA  operations  do 
contribute,  albeit  sometimes  modestly  and  indirectly,  to  the  improvement  of  the 
external sustainability, the macroeconomic stability and the achievement of structural 
reforms in the recipient country. In most cases, MFA operations had a positive effect 
on  the  balance  of  payments  of  the  beneficiary  country  and  helped  to  relax  their 
budgetary constraints. They also led to somewhat higher economic growth.  

An  independent  evaluation  examined  in  2017  the  added  value,  impact,  design  and 
implementation of one previous MFA operation in Jordan (MFA-I for a total of EUR 
180 million disbursed in 2015) and found it to be relevant, effective and efficiently 
implemented.  The  main  conclusions  from  the  evaluation  are  that  the  MFA  had  a 
positive  impact  on  Jordan’s  economy,  helping  the  country  to  stabilise  its  external 
position  and  contribute  to  the  reform  efforts.  Also,  due  to  its  very  favourable 
financing terms, the MFA contributed to Jordan’s debt sustainability and allowed a 
more  gradual  fiscal  consolidation,  which  would  otherwise  have  serious  negative 
social impacts (such as further public spending cuts). 

1.5.4.  Compatibility  with  the  Multiannual  Financial  Framework  and  possible  synergies 

with other appropriate instruments 

Compatibility with the Multiannual Financial Framework 

As part of the mid-term review of the 2014-2020 multiannual financial framework, 
the annual lending capacity of the MFA was increased to EUR 2 000 million. This 
amount is  sufficient  to cover this operation as well as other MFA operations  being 
implemented. 

Possible synergies with other EU instruments: 

The EU is among the major donors to Jordan, supporting its economic, structural and 
institutional reforms as well as civil society. In this context, MFA complements other 
EU  external  actions  or  instruments  used  to  support  Jordan.  The  policy  measures 
associated with MFA cover selected provisions related to the Association Agreement 
and the EU Jordan Partnership Priorities.  It is  also  aligned with  the Single Support 
Framework  defining  areas  of  focus  of  bilateral  aid  under 
the  European 
Neighbourhood Instrument for 2014-2020.  

The key value added of the MFA in comparison to other EU instruments would be to 
help create a stable macroeconomic framework, including by promoting a sustainable 
balance-of-payments  and  budgetary  situation,  and  an  appropriate  framework  for 
advancing structural reforms. MFA does not provide regular financial support and is 
to  be  discontinued  as  soon  as  the  country's  external  financial  situation  has  been 
brought back onto a sustainable path.  

MFA would also  be complementary to  interventions  envisaged by the international 
community,  in  particular  the  adjustment  and  reform  programmes  supported  by  the 
IMF and the World Bank. 

1.5.5.  Assessment  of  the  different  available  financing  options,  including  scope  for 

redeployment 

By  using  loans,  this  MFA  operation  increases  the  effectiveness  of  the  EU  budget 
through the leverage effect and provides for the best cost-efficient option.  

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The  Commission  is  empowered  to  borrow  funds  from  capital  markets  on  behalf  of 
both  the  European  Union  and  Euratom  using  the  guarantee  of  the  EU  budget.  The 
aim is to obtain funds from the market at the best available rates due to the top credit 
status  (AAA-rated  by  Fitch,  Moody's  and  DBRS,  AA  by  S&P,  all  with  stable 
outlook)  of  the  EU/Euratom  and  then  on-lend  them  to  eligible  borrowers  in  the 
context of lending under the EFSM, BoP, MFA and to Euratom projects. Borrowing 
and  lending  is  conducted  as  a  back-to-back  operation,  ensuring  that  the  EU  budget 
does not take any interest rate or foreign exchange risk. The target of obtaining funds 
at  the  best  available  rates  for  borrowing  and  lending  activities  has  been  achieved 
because  those  rates  are  in  line  with  peer  institutions  (EIB,  EFSM,  and  ESM),  as 
confirmed by the ECA in 2016. 

1.6. 

Duration and financial impact of the proposal/initiative 

 limited duration  

–  In  effect  for  2.5  years  from  the  entry  into  force  of  the  Memorandum  of 

Understanding, as stated in Article (1.4) of the Decision. 

–  Financial  impact  from  2020  to  2023  for  commitment  appropriations  and  from 

2020 to 2023 for payment appropriations.  

1.7.  Management mode(s) planned14  

 Direct management by the Commission 

–   by its departments, including by its staff in the Union delegations;  

14 

Details of management modes and references to the Financial Regulation may be found on the 
BudgWeb site: 
https://myintracomm.ec.europa.eu/budgweb/EN/man/budgmanag/Pages/budgmanag.aspx  

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2. 

MANAGEMENT MEASURES  

2.1.  Monitoring and reporting rules  

This assistance is of macroeconomic nature and its design is consistent with the IMF-
supported  economic  programme.  The  monitoring  of  the  action  by  the  Commission 
services  will  take  place  on  the  basis  of  progress  in  the  implementation  of  the  IMF 
arrangement and specific reform measures to be agreed with the Jordanian authorities 
in  a  Memorandum  of  Understanding  (see  also  point  1.4.4)  with  a  frequency  that  is 
consistent with the number of instalments. 

2.2.  Management and control system(s)  

2.2.1. 

Justification of the management mode(s), the funding implementation mechanism(s), 
the payment modalities and the control strategy proposed 

The  actions  to  be  financed  under  this  Decision  will  be  implemented  under  direct 
management  by  the  Commission  from  headquarters  and  with  support  of  the  Union 
delegations.  

MFA disbursements are dependent on successful reviews, and tied to the fulfilment 
of  conditionality  attached  to  each  operation.  The  implementation  of  conditions  is 
closely  monitored  by  the  Commission,  in  close  coordination  with  the  Union 
Delegations. 

2.2.2. 

Information concerning the risks identified and the internal control system(s) set up 
to mitigate them 

Risks identified  

There are fiduciary, policy and political risks related to the proposed MFA operation.  

There  is  a  risk  that  the  MFA  could  be  used  in  a  fraudulent  way.  As  MFA  is  not 
designated  to  specific  expenses  by  Jordan  (contrary  to  project  financing,  for 
example),  this  risk  is  related  to  factors  such  as  the  general  quality  of  management 
systems  in  the  Central  Bank  of  Jordan  and  the  Ministry  of  Finance,  administrative 
procedures,  control  and  oversight  functions,  the  security  of  IT  systems  and  the 
appropriateness of internal and external audit capabilities. 

A second risk stems from the possibility that Jordan will fail to service the financial 
liabilities towards the EU stemming from the proposed MFA loans (default or credit 
risk), which could be caused for example by a significant additional deterioration of 
the balance of payments and fiscal position of the country.  

Another  key  risk  to  the  operation  stems  from  the  regional  geopolitical  situation,  in 
particular the conflict in Syria, which acts as an important deterrent to private capital 
and inflows and has obstructed trade with neighbouring countries like Syria and Iraq. 
A worsening of the regional  geopolitical  situation could  have  a negative  impact  on 
Jordan’s macroeconomic stability, affecting the performance of the IMF programme 
and the disbursement and/or repayment of the proposed MFA. In addition, we should 
note  that  Jordan  remains  exposed  to  potential  oil  shocks  as  it  heavily  relies  on 
imported oil for its energy needs. Moreover, the rising interest  rates of the USD to 
which the Jordanian Dinar is pegged, increases the cost of external borrowing. Last, 
Jordan  dependence  on  foreign  aid  has  increased.  Although  the  international 
community has committed to support Jordan, the country needs to continue to attract 

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sizeable  amounts  of  foreign  aid  in  order  to  cover  its  financing  needs  in  the  next 
years. 

On  the  domestic  front,  the  main  risks  stem  from  the  citizen’s  discontent  from  the 
worsening of the economic situation and the rise of unemployment. This could result 
in  insufficient  reform  implementation  or  popular  unrest,  like  it  happened  with  the 
change of government in mid-2018, and therefore hamper the implementation of the 
proposed MFA, inlcuding though impacting on progress with the IMF programme.  

Control method(s) envisaged  

The  macro-financial  assistance  will  be  liable  to  verification,  control  and  auditing 
procedures under the responsibility of the Commission, including the European Anti-
Fraud Office (OLAF), and by the European Court of Auditors as foreseen by Article 
129 of the Financial Regulation 

Ex-ante:  Commission  assessment  of  management  and  control  systems  in  the 
beneficiary  countries.  For  each  beneficiary  country,  an  ex-ante  operational 
assessment  of  the  financial  circuits  and  control  environment  is  carried  out  by  the 
Commission  with  technical  support  from  consultants.  An  analysis  of  accounting 
procedures, segregation of duties and internal/external audit of the Central bank and 
the Ministry of Finance are carried out to ensure a reasonable level of assurance for 
sound  financial  management.  Should  weaknesses  be  identified,  they  are  translated 
into  conditions,  which  have  to  be  implemented  before  the  disbursement  of  the 
assistance. Also, when needed, specific arrangements for payments (e.g. ring-fenced 
accounts) are put in place. 

During  implementation:  Commission  checks  of  periodic  beneficiary  country 
declarations. The payment is subject to (1) monitoring by DG ECFIN staff, in close 
coordination  with  the  EU  Delegations  and  with  the  external  stakeholders,  like  the 
IMF, of the implementation of the agreed conditionalities, and (2) the normal control 
procedure  provided  for  by  the  financial  circuit  (model  2)  used  in  DG  ECFIN, 
including  the  verification  by  the  financial  unit  of  the  fulfilment  of  conditions 
attached  to  the  disbursement  of  the  assistance  mentioned  above.  The  disbursement 
relating  to  MFA  operations  may  be  subject  to  additional  independent  ex-post 
(documentary  and/or  on-the-spot)  verifications  by  officials  of  the  ex-post  control 
team  of  the  DG.  Such  verifications  may  also  be  initiated  at  the  request  of  the 
responsible AOSD. Interruptions and suspensions of payments, financial corrections 
(implemented  by  Commission),  and  recoveries  may  be  practiced  where  needed  (it 
has not occurred so far), and are explicitly foreseen in the financing agreements with 
the beneficiary countries. 

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2.2.3.  Estimation and justification of the cost-effectiveness of the controls (ratio of "control 
costs ÷ value of the related funds managed"), and assessment of the expected levels 
of risk of error (at payment & at closure)  

The control systems in place, such as the ex-ante operational assessments or the ex-
post assessments, ensured an effective error rate for the MFA payments of 0%. There 
are no known  cases  of  fraud, corruption or illegal activity. MFA operations have  a 
clear  intervention  logic,  one  that  allows  the  Commission  to  evaluate  their  impact. 
The  controls  enable  the  confirmation  of  assurance  and  of  attainment  of  policy 
objectives and priorities. 

2.3.  Measures to prevent fraud and irregularities  

To mitigate the risks of fraudulent use several measures have been and will be taken:  

First,  the  Loan  Agreement  will  comprise  a  set  of  provisions  on  inspection,  fraud 
prevention, audits and recovery of funds in case of fraud or corruption. It is further 
envisaged  that  a  number  of  specific  policy  conditions  will  be  attached  to  the 
assistance,  including  in  the  area  of  public  finance  management,  with  a  view  to 
strengthening  efficiency,  transparency  and  accountability.  Also,  the  assistance  will 
be paid to a specific account of the Central Bank of Jordan.  

Moreover, in line with the requirements of the Financial Regulation, the Commission 
services will carry out an Operational Assessment of the financial and administrative 
circuits  of  Jordan  to  ascertain  that  the  procedures  in  place  for  the  management  of 
programme assistance, including MFA, provide adequate guarantees. The assessment 
will cover areas such  as budget  preparation and  execution, public internal  financial 
control,  internal  and  external  audit,  public  procurement,  cash  and  public  debt 
management,  as  well  as  the  independence  of  the  central  bank.  The  Operational 
Assessment is expected to be carried out in the first quarter of 2020. Developments 
in that area will be further closely monitored by the EU Delegation in Amman. The 
Commission is also using budget support assistance to help the Jordanian authorities 
improve their PFM systems, and these efforts are strongly supported by other donors. 

Finally, the assistance will be liable to verification, control and auditing procedures 
under  the  responsibility  of  the  Commission,  including  the  European  Anti-Fraud 
Office (OLAF), and the European Court of Auditors as foreseen by Article 129 of the 
Financial Regulation. 

EN 

28 

  EN 

 
3. 

3.1. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE  

Heading(s)  of  the  multiannual  financial  framework  and  expenditure  budget 
line(s) affected  

  Existing budget lines  

In order of multiannual financial framework headings and budget lines. 

Budget line 

Heading of 
multiannual 
financial 
framework 

Number  

4 

4 

01 03 02 

Macro-financial assistance 

01 03 06  

Provisioning of the Guarantee Fund 

Type of  
expenditure 

Diff./Non-
diff.15 

Contribution  

from 
EFTA 
countries
16 

from 
candidate 
countries17 

from third 
countries 

within the 
meaning of 
Article 21(2)(a) of 
the Financial 
Regulation  

Diff. 

NO 

NO 

NO 

NO 

Non-diff. 

NO 

NO 

NO 

NO 

to 

the  Fund  Regulation,18  using 

01 03 06  –  According to the Commission  proposal,  the Guarantee  Fund  for external 
actions  will  be  provisioned  according 
the 
appropriations under budget line 01 03 06 (“Provisioning of the Guarantee Fund”), at 
a rate of 9% of the total outstanding liabilities. The provisioning amount is calculated 
at the beginning of the year “n” as the difference between  the target amount and the 
Fund’s net assets at the end of the year “n-1”. This provisioning amount is entered in 
year  “n”  into  the  “n+1”  draft  budget  and  effectively  paid  in  one  transaction  at  the 
beginning  of  the  year  “n+1”  from  the  budget  line  “Provisioning  of  the  Guarantee 
Fund” (budget line 01 03 06). As a result, 9% of the effectively disbursed amount will 
be considered in the target amount at the end of the year “n-1” for the calculation of 
the provisioning of the Fund. 

N.B. Under the new MFF, there will be a new budgetary nomenclature which has not 
yet  been  adopted.  The  budgetary  impact  after  2020  will  thus  fall  on  the  successor 
budget lines. 

15 
16 
17 
18 

Diff. = Differentiated appropriations / Non-diff. = Non-differentiated appropriations. 
EFTA: European Free Trade Association.  
Candidate countries and, where applicable, potential candidates from the Western Balkans. 
Council Regulation (EC, EURATOM) No 480/2009 of 25 May 2009 establishing a Guarantee Fund for 
external actions, OJ L 145, 10.6.2009, p. 10. 

EN 

29 

  EN 

 
 
 
 
                                                 
3.2. 

Estimated financial impact of the proposal on appropriations  

3.2.1. 

Summary of estimated impact on operational appropriations  

–    The proposal/initiative requires the use of operational appropriations, as explained below: 

Heading of multiannual financial  
framework  

4 

The EU as a global partner  

EUR million (to three decimal places) 

DG: ECFIN 

2019 

2020 

2021 

2022 

2023 

TOTAL 

 Operational appropriations19  

Budget  line  01  03  06  Provisioning  of  the 
Guarantee Fund 

line  01  03  02  Macro-financial 
Budget 
assistance  (operational  assessment  and  ex-
post evaluation) 

Commitments 

Payments 

Commitments 

Payments  

Appropriations  of  an  administrative 
nature  financed  from  the  envelope  of 
specific programmes20 

Commitments  = 
Payments 

(1) 

(2) 

(3) 

(4) 

(5) 

TOTAL appropriations 
under HEADING 4 
of the multiannual financial framework 

Commitments 

=1+3 

Payments 

=2+4 

27 

27 

18 
18 

0.15 

0.15 

27 

27 

18.15 

18.15 

45 

45 

0.22 

0.22 

- 

45.22 

45.22 

0.07 

0.07 

0.07 

0.07 

19 
20 

EN 

According to the current official budget nomenclature. As from 2021, the budgetary impact will fall on the successor lines in the next MFF. 
Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former ‘BA’ lines), indirect research, direct research. 

30 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Heading of multiannual financial  
framework  

5 

‘Administrative expenditure’ 

2019 

2020 

2021 

2022 

2023 

TOTAL 

EUR million (to three decimal places) 

DG: ECFIN 

 Human resources  
 Other administrative expenditure  

0.030 

0.010 

0.064 

0.020 

0.038 

0.010 

0.002 

0.023 

TOTAL DG ECFIN 

Appropriations  

0.040 

0.084 

0.048 

0.002 

TOTAL appropriations 
under HEADING 5 
of the multiannual financial framework  

(Total  commitments  = 
Total payments) 

0.040 

0.084 

0.048 

0.002 

0.023 

0.023 

0.157 

0.040 

0.197 

0.197 

TOTAL appropriations  
under HEADINGS 1 to 5 
of the multiannual financial framework  

Commitments 

0.040 

0.154 

0.048 

27.002 

Payments 

0.040 

0.154 

0.048 

27.002 

18.173 

18.173 

45.417 

45.417 

2019 

2020 

2021 

2022 

2023 

TOTAL 

EUR million (to three decimal places) 

3.2.2.  Estimated output funded with operational appropriations  

Indicate 
objectives and 
outputs  

EN 

Year 
2019 

Year 
2020 

Year 
2021 

Year 
2022 

Year  
2023 

TOTAL 

Commitment appropriations in EUR million (to three decimal places) 

OUTPUTS 

31 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Type21 

Avera
ge 
cost 

  Cos
o
N
t 

o
N

Cost 

o
N

Cost 

o
N

Cost 

o
N

Cost 

Total 
No 

Total 
cost 

SPECIFIC OBJECTIVE No 122… 

- Output 

- Output 

- Output 

Operational  
Assessment 

Provisioning 
of the 
Guarantee 
Fund 

Ex-post 
Evaluation  

1 

0.070 

Subtotal for specific objective No 1 

TOTALS 

1 

1 

0.070 

0.070 

2 

27 

1 

18 

1 

2 

2 

0.150 

18.150 

18.150 

2 

2 

27 

27 

1 

3 

1 

5 

5 

0.070 

45 

0.150 

45.22 

45.22 

21 
22 

Outputs are products and services to be supplied (e.g.: number of student exchanges financed, number of km of roads built, etc.). 
As described in point 1.4.2. ‘Specific objective(s)…’  

EN 

32 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.3. 

Summary of estimated impact on administrative appropriations  

–    The proposal/initiative requires the use of appropriations of an administrative 

nature, as explained below: 

EUR million (to three decimal places) 

Year 
2019 

Year 
2020 

Year 
2021 

Year 
2022 

Year 
 2023  

TOTAL 

HEADING 5 
of the multiannual 
financial framework 

Human resources  

0.030 

0.064 

0.038 

0.002 

0.023 

0.157 

0.010 

0.020 

0.010 

0.040 

0.084 

0.048 

0.002 

0.023 

0.040 

0.197 

Other administrative 
expenditure 

Subtotal HEADING 5 
of the multiannual 
financial framework  

Outside HEADING 523 
of the multiannual 
financial framework  

Human resources  

Other expenditure  
of an administrative 
nature 

Subtotal  
outside HEADING 5 
of the multiannual 
financial framework  

TOTAL 

0.040 

0.084 

0.048 

0.002 

0.023 

0.197 

The  appropriations  required  for  human  resources  and  other  expenditure  of  an  administrative  nature  will  be  met  by 
appropriations from the DG that are already assigned to management of the action and/or have been redeployed within the 
DG,  together  if  necessary  with  any  additional  allocation  which  may  be  granted  to  the  managing  DG  under  the  annual 
allocation procedure and in the light of budgetary constraints. 

23 

Technical  and/or  administrative  assistance  and  expenditure  in  support  of  the  implementation  of  EU programmes 
and/or actions (former ‘BA’ lines), indirect research, direct research. 

EN 

33 

  EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.3.1.  Estimated requirements of human resources  

–    The proposal/initiative requires the use of human resources, as explained below: 

 

Estimate to be expressed in full time equivalent units 

Year 
2019 

Year 
2020 

Year 
2021 

Year 
2022 

Year 
2023 

 Establishment plan posts (officials and temporary staff) 

XX 01 01 01 (Headquarters and Commission’s Representation Offices) 

0.10 

0.25 

0.15 

0.01 

0.01 

XX 01 01 02 (Delegations) 

XX 01 05 01/11/21 (Indirect research) 

10 01 05 01/11 (Direct research) 

 External staff (in Full Time Equivalent unit: FTE)

24

XX 01 02 01 (AC, END, INT from the ‘global envelope’) 

0.20 

0.35 

0.20 

0.01 

0.01 

XX 01 02 02 (AC, AL, END, INT and JPD in the delegations) 

XX 01 04 yy 

25

 

 

 

- at Headquarters 

- in Delegations  

XX 01 05 02/12/22 (AC, END, INT - Indirect research) 

10 01 05 02/12 (AC, END, INT - Direct research) 

Other budget lines (specify) 

TOTAL 

0.30 

0.60 

0.35 

0.02 

0.20 

XX is the policy area or budget title concerned. 

The  human  resources  required  will  be  met  by  staff  from  the  DG  who  are  already  assigned  to  management  of  the  action 
and/or have been redeployed within the DG, together if necessary with any additional allocation which may be granted to the 
managing DG under the annual allocation procedure and in the light of budgetary constraints. 

Description of tasks to be carried out: 

Officials and temporary staff 

Director  Dir.  D:  Supervise  and  manage  the  operation,  liaise  with  Council  and 
Parliament for the adoption of the Decision and the approval of the Memorandum of 
Understanding  (MoU),  negotiate  the  MoU  with  the  authorities  of  the  beneficiary 
country,  review  reports,  lead  missions  and  assess  progress  with  conditionality 
compliance. 

HoU/DHoU  Dir.  D:  Assist  the  Director  in  managing  the  operation,  liaising  with 
Council and Parliament for the adoption of the Decision and the approval of the MoU, 
negotiating the MoU and (together with Dir. L) the Loan Facility Agreement with the 
authorities  of  the  beneficiary  country,  reviewing  reports  and  assessing  progress  with 
conditionality compliance.  

Desk economists, MFA Sector (Dir. D): Prepare the Decision and MoU, liaise with the 
authorities  and  the  IFIs,  conduct  review  missions,  prepare  Commission  staff  reports 

24 

25 

AC=  Contract  Staff;  AL  =  Local  Staff;  END=  Seconded  National  Expert;  INT  =  agency  staff;  JPD= Junior 
Professionals in Delegations.  
Sub-ceiling for external staff covered by operational appropriations (former ‘BA’ lines). 

  EN 

34 

  EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
and  Commission  procedures  related  to  the  management  of  the  assistance,  liaise  with 
external experts for the operational assessment and the ex-post evaluation.  

Directorate L (Units L1, L2 and L3 under the supervision of the Director): Prepare the 
Loan  Facility  Agreement  (LFA),  negotiate  it  with  the  authorities  of  the  beneficiary 
country and have it approved by the  responsible  Commission services and signed by 
both  parties.  Follow  up  the  entry  into  force  of  the  LFA.  Prepare  the  Commission 
decision(s) on the borrowing transaction(s), follow up the submission of the Request(s) 
for  Funds,  select  the  banks,  prepare  and  execute  the  funding  transaction(s)  and 
disburse  the  funds  to  the  beneficiary  country.  Carry  out  the  back-office  activities  to 
follow up the reimbursement of the loan(s). Prepare the corresponding reports on these 
activities. 

External staff 

3.2.4.  Compatibility with the current multiannual financial framework  

The proposal/initiative: 

–    can  be  fully  financed  through  redeployment  within  the  relevant  heading  of  the 

Multiannual Financial Framework (MFF). 

3.2.5.  Third-party contributions  

The proposal/initiative: 

–    does not provide for co-financing by third parties 

3.3. 

Estimated impact on revenue  

–    The proposal/initiative has no financial impact on revenue. 

  EN 

35 

  EN