COMMISSION STAFF WORKING DOCUMENT ex-ante evaluation statement Accompanying the document Proposal for a DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on providing macro-financial assistance to the Hashemite Kingdom of Jordan
Date: 2024-04-08
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

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 8.4.2024  SWD(2024) 89 final  COMMISSION STAFF WORKING DOCUMENT ex-ante evaluation statement Accompanying the document Proposal for a DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on providing macro-financial assistance to the Hashemite Kingdom of Jordan {COM(2024) 159 final}  
 
 
 
 
 
Ex ante evaluation statement 

EU macro-financial assistance to the Hashemite Kingdom of Jordan 

TABLE OF CONTENTS 

1.1 

1.2 

Introduction ............................................................................................................................. 2 

Jordan’s macroeconomic situation .......................................................................................... 3 

1.3. 

IMF and other donor support .................................................................................................. 6 

1.4. 

External financing needs .......................................................................................................... 7 

1.5. 

Structural reform challenges ................................................................................................... 9 

2.1.  Objectives............................................................................................................................... 11 

2.2  Monitoring indicators ............................................................................................................ 11 

3.1 

3.2 

5.1 

5.2 

5.3 

5.4 

5.5 

6.1 

6.2 

Delivery mechanisms ............................................................................................................. 12 

Risk assessment ..................................................................................................................... 12 

Exceptional Character and Limited Time-frame .................................................................... 14 

Political preconditions and EU-Jordan relations .................................................................... 14 

Complementarity ................................................................................................................... 15 

Conditionality ......................................................................................................................... 15 

Financial Discipline ................................................................................................................. 15 

Evaluation .............................................................................................................................. 16 

Achieving cost-effectiveness .................................................................................................. 16 

1 

 
 
PROBLEM ANALYSIS AND NEEDS ASSESSMENT 

1.1 

Introduction 

Amid  increasingly  challenging  global  economic  developments,  Jordan’s  economic  growth  has 
remained overall stable at around 2% in the last 5 years (excluding a marked contraction in the 
pandemic year of 2020). However, this growth performance was weaker than that of regional peers 
and not strong enough to lower the very high unemployment or help ease the considerable public 
debt burden. Instead, fiscal pressures have remained high, with persistent budget deficits further 
adding to the already high public debt, which reached 88.7% of GDP (excluding holdings by the 
Social  Security  Corporation  (SSC))  in  2023.  Having  remained  relatively  contained  in  the  last 
5 years, consumer price inflation slowed to 1.6% at the end of 2023 as a result of the monetary 
tightening policy, among other factors. The high interest rates, however, are expected to weigh on 
economic activity going forward. On the external side, Jordan experiences chronic external deficits 
(7.1% of GDP current account deficit in H1 2023), driven by the persistent deficit in trade in goods, 
which reflects the economy’s dependence on energy, food and machinery imports in conjunction 
with a weak export base. 

A broadly appropriate policy response and large-scale international support have so far helped the 
country to preserve macroeconomic stability, but the persistent economic challenges reflected in 
external and fiscal deficits make the economy vulnerable to external shocks. In past years, Jordan 
has taken initiatives to modernise its economy, most recently with the Economic Modernisation 
Vision of 2022, to attract foreign investment and promote growth, also supported by the reform 
agendas underpinning the earlier macro-financial assistance (MFA) operations. 

These reform efforts were undertaken at a time when Jordan faced multiple external shocks, in 
particular  the  war  in  neighbouring  Syria  and  the  major  influx  of  refugees  that  followed,  the 
COVID-19 pandemic, Russia’s full-scale war of aggression against Ukraine, increased security 
challenges along the Syrian border and, most recently, the war in Israel/Gaza and ensuing Red Sea 
crisis impacting important trade routes. Against this background, continued support from Jordan’s 
international partners remains essential. 

In mid-2022, the government launched the Economic Modernisation Vision, which aims to boost 
economic growth, create new jobs and raise the standard of living in Jordan over the next 10 years. 
The Vision builds on prior reform efforts, such as the London Initiative’s 5-year Reform Matrix 
of 2018. Eight areas were identified as the main drivers to achieve these targets, amongst them 
manufacturing,  agriculture  and  mining,  ICT  and  healthcare.  In  the  context  of  the  Vision,  the 
government also envisages a public administration reform, including the merge of a number of 
ministries and public institutions and the reallocation of powers, and political modernisation, by 
revitalising political parties’ roles and increasing citizens’ involvement in public life. Reforms to 
boost economic growth and to increase the efficiency of the public administration would positively 

2 

 
 
 
 
impact  public  finances  via  higher  tax  revenue  and  improved  public  finance  management, 
respectively, with the aim to bring down the high public debt. 

In light of the multiple external shocks and its importance to ensure stability in the region, Jordan 
received substantial support in various forms from its international partners in the past decade. 
This includes three MFA programmes since 2014, where the EU and other international partners 
dedicated  support  for  hosting  Syrian  refugees;  four  consecutive  International  Monetary  Fund 
(IMF) programmes since 2012; and substantial US support in the form of grants. The three MFA 
programmes amounted in total to EUR 1 080 million in loans. MFA-I (2014-2015) amounted to 
EUR 180 million  and  MFA-II  (2016-2019)  to  EUR 200 million.  The  third  and  latest  MFA 
operation  (MFA-III,  2020-2023),  with  an  initial  amount  of  EUR 500 million,  was  adopted  in 
January  2020  and  subsequently  (May  2020)  topped  up  by  EUR 200 million  in  response  to  the 
socio-economic fallout of the COVID-19 pandemic in 2020. MFA-III was successfully concluded 
in May 2023, having supported reforms on public finance management, the utilities sector, social 
and labour market policy, and governance, which saw overall positive even if somewhat uneven 
progress. 

In  this  context  and  given  Jordan’s  continued  sizeable  financing  needs  and  the  many  different 
challenges faced by the country, the Jordanian authorities requested a follow-up MFA operation 
of  EUR 700 million  on  8 October 2023  in  a  letter  to  Commissioner  Gentiloni,  where  they 
specifically referred to challenging global economic prospects, restrictive credit conditions due to 
monetary tightening, high energy costs, inflationary pressures and the burden of the Syrian refugee 
crisis. The call for further assistance comes in a situation of increased uncertainty and regional 
instability, not least due to the outbreak of the war in neighbouring Israel and Gaza the day before 
the letter was sent.  

The present note provides the context and rationale for a forthcoming Commission proposal on a 
follow-up  MFA  operation.  Following  an  in-depth  assessment  of  the  political  and  economic 
situation in Jordan, the Commission is preparing to submit to the European Parliament and the 
Council a proposal to provide MFA of up to EUR 500 million to Jordan. The proposed legal basis 
will be Article 212 of the Treaty on the Functioning of the EU. 

1.2 

Jordan’s macroeconomic situation 

Economic growth has remained stable albeit relatively low (compared to regional peers) over the 
past years, and is expected to only slowly pick up, within an outlook with substantial downside 
risks. Following the contraction during the pandemic, GDP recovered at 2.2% growth in 2021 and 
2.5% in 2022; growth expectations for 2023 were slightly revised downward to 2.6%, following 
the outbreak of the Israel-Gaza war in Q4. The sectors that contributed most to economic growth 
in  2023 were  agriculture, manufacturing, tourism and mining,  reflecting the still strong role of 
these sectors in the economy but also the rebound in tourism. While economic growth has generally 

3 

 
 
 
remained  stable,  it  has  not  been  strong  enough  to  lower  the  very  high  unemployment.  Major 
structural challenges remain to boosting economic growth, in particular in the area of private sector 
development,  where deficiencies in  the business  environment,  access  to  finance, labour market 
flexibility and public administration persist. 

Bringing  down  the  traditionally  high  unemployment  rate  and  increasing  labour  market 
participation are major structural challenges in Jordan. In 2023, the unemployment rate slightly 
decreased to 22.3% in Q3 (22.9% in 2022). Unemployment remains high especially for women, 
young people and university graduates, with women’s labour force participation rate (around 14% 
in 2023) being one of the lowest worldwide.  

Inflation decelerated considerably  in  2023, with average inflation  at  2.1% in  2023 (down from 
4.2% in 2022). Price increases levelled out in response to the tightening of monetary policy and 
lower global commodity prices. The Central Bank of Jordan (CBJ) raised its policy rates in 10 
steps from 2.5% in March 2022 to 7.5% in July 2023. The CBJ decisions were necessary given the 
Jordanian dinar’s peg to the USD, to be in line with the US Federal Reserve’s monetary tightening 
and  avoid  pressures  on  capital  flows,  and  indeed  contributed  to  the  moderation  of  inflationary 
pressures. 

The fiscal situation remains challenging, with structurally high deficits exacerbating the already 
high level of debt. Total public sector debt (excluding debt holdings by the SSC) stood at 88.7% 
of GDP in 2023, slightly down from 90.8% of GDP in 2021, as nominal GDP growth outpaced the 
increase in debt. Adding debt holdings by the SSC, public sector debt reached 111.5% of GDP in 
2023, after having continuously increased over the past decade (from 84.5% of GDP in 2013). In 
its report on the new Extended Fund Facility arrangement with Jordan (January 2024), the IMF 
assessed  Jordan’s  public  debt  level  as  sustainable,  stating  further  that  while  debt  sustainability 
risks remained, the authorities’ policy efforts and the development partners’ ongoing commitment 
to  Jordan  would  constitute  important  safeguards.  The  fiscal  deficit  stood  at  5.1%  for  the  first 
8 months of 2023 (up from 4.6% of GDP in 2022), roughly in line with the average fiscal deficit 
of the past 5 years. Public sector revenue increased by 5.4% during the first 8 months compared to 
the  same  period  a  year  earlier,  on  the  back  of  higher  income  and  profit  tax  collection.  Total 
expenditure  grew  by  2.9%,  driven  by  higher  interest  payments,  military  expenditure  and 
compensation of civil sector employees. In April 2023, Jordan successfully issued Eurobonds for 
USD 1.25 billion,  despite  the  tightening  of  global  financing  conditions.  The  issuance  has  a 
maturity of 6 years at 7.5% and was oversubscribed six times, allowing the government to increase 
the initially sought amount.  

On the external side, Jordan experiences chronic external deficits, driven by the persistent deficit 
in  trade in  goods,  which reflects  Jordan’s dependence on energy, food  and machinery imports. 
Main export items over the past years have been phosphoric acid, potash and phosphates, which 
have benefited from increased demand following Russia’s full-scale invasion of Ukraine. Overall, 
the current account deficit averaged around 6.5% of GDP in the past 5 years, with larger deficits 

4 

 
 
in 2021-2023. Most recently, the current account deficit narrowed to 7.1% of GDP in H1 2023 
(from 13% in H1 2022), on the back of an increased trade in services surplus driven by increasing 
tourism revenue amid the tourism rebound. Strong remittances (around 8% of GDP over the past 
years)  from  abroad  also  contribute  to  mitigating  the  current  account  deficit.  The  CBJ’s  gross 
foreign reserves have remained strong, while decreasing slightly in 2021-2023 to USD 17.3 billion 
at the end of September 2023, covering an estimated 7.6 months of imports of goods and services. 

The IMF, in its January 2024 forecast, expects economic growth to stand at 2.6% in both 2023 and 
2024. Its previous forecast was revised slightly downwards following the outbreak of the war in 
Israel/Gaza. However, the war poses a major risk to the outlook, in particular due to the increased 
level of uncertainty in the region and the possible impact on the important tourism sector. After 
the Hamas terrorist attack of 7 October, sovereign bond spreads for Jordan temporarily increased 
but were back to pre-war levels 4 weeks later. A similar development was observed for oil prices. 
The ongoing Houthi attacks on cargo and energy vessels in the Red Sea pose an additional risk, 
increasing pressure on external accounts, as they impact Jordan’s import and export capacities, 
most  importantly Jordan’s exports of minerals  and chemicals.  Jordan’s energy imports are less 
affected,  as  they  are  mostly  transported  via  pipelines  locally.  Given  the  significant  public  debt 
burden,  the  fiscal  consolidation  course  needs  to  continue,  as  supported  by  the  new  IMF 
programme, narrowing the budget deficit by broadening the tax base and improving the efficiency 
and targeting of social  measures.  The inflation  rate in  Jordan has dropped to  low levels  and is 
expected to remain low in 2024, also due to the  CBJ’s monetary tightening. The resulting high 
interest rate is expected to curb credit growth to the private sector. Fiscal and external deficits are 
expected to  remain high, reflecting the underlying  structural  challenges  to sustainably improve 
fiscal revenue and the trade deficit. At the same time, since Jordan imports most of its energy and 
a large share of its food, including essential cereals, the slower growth of global commodity prices 
helps ease pressures on fiscal and external balances. The Red Sea crisis is expected to weigh on 
exports of fertilisers and phosphates, while the war and general regional instability is expected to 
reduce tourism revenue; in normal times, both sectors are expected to remain key mitigating factors 
to external pressures.  

5 

 
 
 
 
Table 1: Jordan – Selected macroeconomic indicators, 2018-2023 

*SSC: Social Security Corporation, LFS: Labour Force Survey 

Sources: Bank of Jordan, Jordan Department of Statistics, Ministry of Finance 

1.3. 

IMF and other donor support 

In January 2024, the IMF Executive Board approved a new arrangement under the Extended Fund 
Facility  (EFF)  for  Jordan  worth  USD 1.2 billion  covering  the  period  2024-2027.  This  new 
arrangement  replaces  the  previous  4-year  EFF  arrangement,  which  was  set  to  expire  in  March 
2024. Since only a small amount was left in the previous arrangement following significant front-
loading of disbursements, the IMF had proposed to terminate the arrangement early and replace it 
with  a  new  EFF  arrangement.  This  new  arrangement  will  focus  on  continuing  with  fiscal 
consolidation  to  place  public  debt  on  a  steady  downward  path,  safeguarding  monetary  and 
financial stability and accelerating structural reforms to support growth and job creation. 

The  rationale  for  the  new  arrangement  is  based  on  the  need  to  safeguard  the  ongoing  reform 
progress – in particular given the significant risks of increased instability in the region – as the 
IMF  did  not  consider  the  reform  progress  advanced  enough  to  replace  the  previous  EFF 
arrangement  by  a  non-disbursing  programme.  The  approved  IMF  arrangement  is  based  on  a 
baseline scenario that assumes a 9-month war in Israel/Gaza, cautiously incorporating substantial 
impacts on tourism and private capital inflows in the macro-fiscal baseline. Pointing to a need to 
further  strengthen  buffers,  the  new  EFF  arrangement  also  aims  to  further  replenish  external 
reserves further (which stood at 7.6 months of imports in Q3 2023). 

6 

 201820192020202120222023Latest datesNominal GDP, USD million43,37144,56343,64245,18047,51823,663H1 2023Nominal GDP per capita, USD4,3584,4124,2774,4004,6664,244est. Q2Real GDP, % change1.91.8-1.62.22.52.7H1 2023Consumer price inflation, %, end of period3.71.0-0.22.44.41.6Consumer price inflation, %, average4.50.80.31.34.22.1Key monetary policy rate, %, end of period5.754.02.52.56.57.5JulyUnemployment rate, LFS, %18.619.122.724.122.922.3Q2General government balance, % of GDP-2.4-3.3-7.1-5.4-4.6-5.1Jan-AugPublic expenditure, % of GDP27.827.929.830.830.330.2H1Gross public debt (excl. debt held by SSC*), % of GDP76.379.487.590.888.888.7est. DecGross public debt (incl. debt held by SSC*), % of GDP92.195.2106.8111.7114.2113.0est. DecCurrent account balance, % of GDP-6.8-1.7-5.7-8.2-8.6-7.1H1International reserves, USD billion12.914.015.618.017.517.3SeptemberInternational reserves, months of imports6.87.610.19.27.07.6SeptemberGross external debt, % of GDP72.272.182.386.981.081.4H1Net foreign direct investment, % of GDP2.21.61.71.41.93.0H1 
 
 
  
 
The main elements of the new EFF arrangement build on the previous one and are set out below. 

•  To place public debt on a steady downward path, bringing public debt to below 80% of 
GDP by 2028. To achieve such a gradual and steady debt reduction, Jordan will continue 
its fiscal consolidation process, by further broadening the tax base and improving spending 
efficiency, while bolstering social assistance and supporting growth. 

•  To  boost  structural  reform  to  improve  the  business  climate,  private  sector  growth, 
competition and the creation of jobs to achieve a significant reduction in unemployment, 
especially among women and young people.  

•  To continue utilities sector reform to ensure the sector’s financial viability and improve its 

ability to deliver essential services.  

The World Bank has  an active portfolio in Jordan comprising 16 projects with a total value of 
USD 3.9 billion in the form of loans, concessional financing, and grants. The strategic partnership 
framework between the World Bank and Jordan (2017–2023) focuses on key pillars in the areas 
of: (i) promoting private sector-led growth to create job opportunities for all; (ii) improving service 
quality  and  equity  to  ensure  better  access  to  basic  services  such  as  education  and  health;  and 
(iii) supporting effective response and resilient recovery to address the impact of the pandemic. 

The European Investment Bank (EIB) has been active Jordan since 1979. In the public sector, the 
EIB targets sustainable investments in the areas of water, energy, transport, urban development, 
and health. Since the pandemic, the EIB has partnered with several banks to support SMEs and the 
local economy. 

1.4.  External financing needs  

According  to  the  IMF’s  preliminary  estimates,  Jordan’s  external  financing  needs  will  remain 
considerable at USD 3.2 billion in the period 2024-2027, partly reflecting the structural challenges 
to sustainably improve the fiscal performance and the current account deficit, as well as the aim to 
strengthen reserve buffers. The IMF’s new USD 1.2 billion programme would cover close to 40% 
of these external financing needs over the next 4 years. Factoring in the IMF programme, which 
together  with  other  official  external  support  bridges  the  financing  gap  in  2024,  the  remaining 
external  financing  gap  stands  at  USD 1.9 billion  for  2025-2027  according  to  the  IMF’s 
methodology.  In  net  terms,  IMF  disbursements  and  the  World  Bank  arrangements  together 
represent USD 1 897 million of external financing for 2024-2027. 

A  considerable  share  of  the  country’s  external  financing  needs  relates  to  the  accumulation  of 
international reserves (USD 4.6 billion over the years 2024-2027) programmed to reach 100% of 
the reserve adequacy metric of the IMF. International reserves declined slightly in 2021-2023 from 
USD 18.0 billion  or  9.2 months  of  imports  to  USD 17.6 billion  or  7.6 months  of  imports 
(September  2023).  Given  the  increased  uncertainty  and  the  challenging  external  environment, 
further  strengthening  reserves  is  important  to  rebuild  buffers  for  possible  external  shocks  and 

7 

 
 
maintaining external stability. Since the onset of the new programme, the economic fallout of the 
ongoing Israel-Gaza war described in Section 1.2, notably including the Red Sea crisis affecting 
Jordan’s  trade,  has  started  to  become  more  visible  as  significant  downside  risks  to  Jordan’s 
economic prospects and external financing needs.  

to  USD 7.7 billion 

in  2025-20271.  The  proposed  MFA  operation  of  up 

Applying the methodology endorsed by the Economic and Financial Committee, and taking into 
account  the  IMF  and  World  Bank  net  disbursements,  Jordan’s  residual  external  financing  gap 
to 
amounts 
EUR 500 million (USD 543 million2) would cover 7.1% of this estimated residual financing gap 
for  2025-20273.  Taking  into  account  the  overall  EU  support  to  Jordan  via  various  instruments 
(including the proposed MFA, EU budget support and EIB loans, excluding bilateral Member State 
support),  the  total  EU  support  would  cover  16.0%  of  the  estimated  residual  financing  gap;  the 
overall EU contribution including budget support and EIB loans to Jordan is expected to be higher 
than in the past. Such an engagement would be in line with the principles of fair burden-sharing 
among donors and value added of the EU’s MFA enshrined in the 2013 Joint Declaration of the 
European Parliament and the Council on MFA. The proposed amount appears adequate in the light 
of available information about Jordan’s macro-fiscal outlook and the resulting external financing 
needs. Despite significant contributions also from other bilateral and multilateral donors aside from 
the  IMF,  the  World  Bank  and  the  EU,  with  an  MFA  of  USD 543 million,  an  amount  of 
USD 1 369 million of external financing would yet have to be identified for 2025-20274.  

1 This gap is significantly larger than the one estimated by the IMF, as bilateral support grants and loans are subtracted 
in the calculation (see upper part of Table 2) and are added to the financing side, below the line (lower part of 
Table 2). 

2 Converted on the basis of an exchange rate of 1 EUR = 1.098 USD, 11.1.2024. 

3 When expressed in terms of the remaining external financing gap estimated by the IMF (USD 1.9 billion), the MFA 
proposal  of  EUR 500 million  (USD 543 million)  would  cover  28.4%.  This  strongly  contrasts  with  the  7.1% 
calculated according to the other external financing gap methodology, as in the case of Jordan, the traditionally 
and  structurally  large  support  from  key  partners  in  the  form  of  grants  (e.g.  US)  implies  a  particularly  large 
correction of the residual financing gap relative to the residual financing gap under the IMF methodology. 

4 A large part of the outstanding amount is expected to be covered by donors (including EU Member States) in line 
with their long-standing commitment, although the IMF cautiously indicated the contribution of several  major 
donors as ‘zero’ for the years 2025-2027 in the absence of detailed information at this stage. 

8 

 
 
 
 
 
Table 2: Jordan’s external financing gap and potential financing sources 

* Excludes official grants in the form of policy-based budgetary support. 
** Excludes official loans in the form of policy-based budgetary support, Arab Monetary Fund and commercial 
banks' net foreign assets, which are shown below the line. Includes sovereign bond issuance. 
*** All amounts were converted on the basis of an exchange rate of 1 EUR = 1.098 USD, 11.1.2024. 
Sources: Latest IMF estimates and projections (December 2023) and Commission calculations. 

1.5. 

Structural reform challenges 

Reform achievements in 2019-2023, with uneven progress across sectors 

Jordan’s  reform  agenda  for  2019-2023  was  underpinned  by  the  ‘Government’s  Economic 
Priorities  Program’  (GEPP)  for  2021-2023,  the  comprehensive  ‘Five-Year  Reform  Matrix’  for 
2018-2022, which was extended to 2025, and the ‘Government’s Indicative Executive Program’ 
(GIEP). The GEPP addressed key challenges in the labour market and the private sector, with 53 
targets  mainly  derived  from  the  Matrix  and  the  GIEP.  The  Matrix  prioritised  deep  structural 

9 

TotalTotal2024-20272025-20271. Current account balance*-5,137-4,100-3,983-3,999-17,219-12,0822. Capital and financial account balance**2,1691,7562,8183,2539,9967,8273. Overall balance (1+2)-2,968-2,344-1,165-746-7,223-4,2554. Reserves (“-” indicates increase)-282-898-1,551-1,939-4,670-4,3885. Overall External Financing Gap (3+4)-3,250-3,242-2,716-2,685-11,893-8,6436. Exceptional Financing by IMF and WB9143823722291,897983Net IMF Disbursements198536629346148Disbursements of World Bank budget support7163293062001,5518357. Residual Financing Gap (5+6)-2,336-2,860-2,344-2,456-9,996-7,660Financing of the gapEU MFA-IV (EUR 500 million, converted to USD***)217163163543543EU budget support grants14215412693515373GCC grants89719545300211United States grants8536936936852,9242,071Other grants6576366366352,5641,907Arab Monetary Fund loan212212212212848636Asian Infrastructure Investment Bank loan85858080330245EBRD loan000000Islamic Development Bank loan000000EIB loan1311109998438307Other loan33000330Canada000000France1370001370Germany1640001640Italy81000810Japan1000001000Kuwait000000Saudi Arabia000000UAE000000Commercial banks' NFA (“-” indicates increase)-350000-3500Total identified sources2,3342,1782,1042,0118,6276,293Other unidentified financing sources-2-682-240-445-1,369-1,3672027(USD million)202420252026 
 
 
 
 
 
 
reforms needed to stimulate inclusive and sustainable growth and job creation, and achieve fiscal 
stability. Its pillars comprised reforms in the areas of revenue mobilisation and debt management, 
public sector efficiency, private sector development, labour markets, social safety, infrastructure, 
utilities  and  tourism.  The  mid-term  review  in  2020  revealed  that  46%  of  reforms  had  been 
implemented,  yet  delays  were  observed  in  particular  for  the  transport  and  utilities  pillars.  In 
parallel,  the  GIEP  included  the  government’s  vision  for  political,  social  and  economic 
development that targets economic growth, job creation and poverty reduction. It went beyond the 
Matrix in the areas of fighting corruption and the green and digital agenda.  

Despite the setbacks caused by the challenging economic environment, Jordan still advanced major 
reform projects in 2023. These include (but are not limited to) the following: partial roll-out of 
new  electricity  tariffs  for  businesses  and  households;  substantial  progress  in  strengthening  the 
regime  for  anti-money  laundering  /  combating  the  financing  of  terrorism;  public  sector 
modernisation (hiring and promotion of civils servants); and adjustments in the electricity sector. 

Main government priorities for the near future 

In June 2022, the government presented its Economic Modernisation Vision. The plan envisages 
creating one million new jobs, raising the standard of living and boosting economic growth over 
the next 10 years. Eight areas were identified as the main drivers to achieve these targets, covering 
economic sectors (manufacturing, agriculture and mining; ICT, healthcare and financial services; 
and tourism and culture) and cross-cutting topics (HR and entrepreneurship; sustainable resources; 
investment and doing business; green growth and climate change; and quality of life and urban 
development).  

For  2024,  the  Jordanian  government  allocated  JOD 734 million  (EUR 943 million),  of  which 
JOD 250 million  (EUR 321 million)  financed  by  foreign  aid,  for  implementing  the  Vision’s 
programme. One third of this budget will be dedicated to the utilities sector, in particular to the 
Aqaba-Amman  Water  Desalination  and  Transport  Project,  reducing  non-revenue  water  loss, 
supporting regional electric grid projects, and improving natural gas infrastructure. Roughly 10% 
of the budget will be used to support the tourism industry, promoting Jordan internationally, also 
to compensate for the expected revenue shortfall potentially resulting from the Israel-Gaza war. 
Further priority areas in 2024 include boosting high-value industries, supporting national industry, 
developing the food industry, and increasing the competitiveness of national exports. A focus is 
also  set  on  digitalisation  of  the  economy,  for  instance  in  hospitals  and  healthcare  centres, 
e-commerce and e-gaming.  

In the context of the Vision, the government also envisages to modernise the public administration. 
The authorities have started implementing the Public Sector Modernisation Roadmap, which aims 
to improve public sector services by merging a number of ministries and public institutions and 
reallocating powers. The government endorsed a new human resources strategy in 2023, including 
the set-up of a Public Service and Administration Commission, in charge of the mechanism for 

10 

 
 
public  service  recruitment,  and  a  new  automated  HR  management  information  system  with 
real-time  civil  service  data  and  performance  management  functions.  Future  plans  include  the 
restructuring of the Ministry of Investment and the Ministry of Human Resources Development.  

The Economic Modernisation Vision and the Public Sector Modernisation Roadmap are widely 
supported by the different ministries as an important push to advance the economic development 
of  the  country.  King  Abdullah  II  of  Jordan  has  been  taking  a  strong  interest  in  the  reforms, 
organises regular meetings with government officials, and is known to be a strong supporter of the 
modernisation.  

The new IMF arrangement (see Section 1.3) has been set up to safeguard the reform progress and 
support  the  modernisation  projects.  Targeted  policy  conditionality  building  upon  Jordan’s 
structural  reform  plans,  including  via  the  envisaged  EU  MFA,  can  play  a  major  role  in 
strengthening domestic reform implementation. In this way, the MFA can – in addition to helping 
bridge Jordan’s external financing gap – help put the country on a more sustainable economic path 
by supporting the authorities in tackling reforms to address key vulnerabilities that are at the root 
of  its  financing  needs.  Possible  areas  of  conditionality  could,  in  principle,  include  reforms  to 
improve  economic  governance,  including  public  finance  management  and  tax  administration; 
social and labour market policy; and governance and fight against fraud, corruption and money-
laundering.  Close  coordination  with  and  between  development  partners  on  reform  priorities  is 
essential  in  this  context.  Last  but  not  least,  communication  by  the  authorities  with  the  general 
public will be essential to ensure popular buy-in to the reform programme and overcome vested 
interests. 

2. 

OBJECTIVES AND RELATED INDICATORS OF THE MACRO-FINANCIAL ASSISTANCE 

2.1.  Objectives 

The objectives of the proposed MFA operation are to:  

i)  contribute  to  covering  the  external  financing  needs  of  Jordan  in  the  context  of  a  sizeable 

external financing gap; 

ii)  support  the  fiscal  consolidation  effort  and  external  stabilisation  expected  under  the  IMF 

programme; and 

iii) support  and  shield  structural  reform  efforts  that  aim  to  improve  overall  macroeconomic 
management, strengthen economic governance and transparency, and improve the conditions 
for sustainable growth. 

2.2  Monitoring indicators 

The Commission will assess whether the objectives of the assistance have been achieved, including 
as part of the ex post evaluation (see below), on the basis of the following indicators:  

i)   progress with macroeconomic and financial stabilisation, notably by assessing the degree of 

adherence to the IMF-supported programme; and 

11 

 
 
 
ii)   progress with the implementation of structural reforms, notably the specific policy measures 
to be identified as conditions for disbursement of the assistance, which will be included in a 
Memorandum of Understanding to be negotiated between the Commission and the Jordanian 
authorities. 

3.  DELIVERY MECHANISMS AND RISK ASSESSMENT 

3.1 

Delivery mechanisms 

The MFA operation under consideration is expected to cover part of the residual financing gap for 
the 2024-2027 period and would amount to a maximum of EUR 500 million in loans. Given the 
proposed size of the operation, the Commission is considering releasing the assistance in three 
instalments. 

As the proposed amount represents a significant share of the residual financing, it is important to 
ensure the MFA’s value added, notably by providing the EU with sufficient leverage to promote 
reforms. To this end, policy conditions will be attached to the MFA’s disbursements, with each 
instalment  being  subject  to  good  progress  with  the  IMF  programme  and  the  specific  measures 
agreed with the EU in the Memorandum of Understanding as well as the fulfilment of the political 
precondition (see below). 

The Commission proposes to provide the proposed MFA in the form of medium-term loans. As 
usual, these loans will carry very favourable conditions in terms of maturity (on average 20 years) 
and grace period (10 years) and an interest rate corresponding to the EU’s triple A rating (the rate 
at which the EU borrows the funds in the international capital markets). 

3.2 

Risk assessment 

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

There  is  a  risk  that  the  MFA,  which  is  not  dedicated  to  specific  expenses  (contrary  to  project 
financing, for example), could be used in a fraudulent way. In general terms, this risk is related to 
factors such as the quality of management systems in the Central Bank 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. 

To mitigate the risks of fraudulent use, several measures 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. Also, the assistance will be paid to a dedicated account of the CBJ.  

Moreover, in line with the requirements of the Financial Regulation, the Commission will carry 
out an Operational Assessment of the financial and administrative circuits of Jordan to confirm 
that  the  procedures  in  place  for  managing  programme  assistance,  including  MFA,  provide 
adequate guarantees. The Operational Assessment will be supported by a study from an external 
consultant before the implementation of the MFA.  

The Commission is also using budget support assistance to help the Jordanian authorities improve 
their  governance,  rule  of  law,  accountability  and  effective  administration.  These  efforts  are 
strongly supported by other donors. 

12 

 
 
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.  

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). This could be 
caused by a significant additional deterioration of the balance of payments and fiscal position of 
the country or/and by unforeseen events. This risk is mitigated, however, by the fact that the EU’s 
MFA  would  be  part  of  an  international  package  of  official  assistance  led  by  the  IMF  that  is 
supporting  an  adjustment  and  reform  programme  to  restore  fiscal  and  balance  of  payments 
sustainability by implementing a series of policy measures, included those to be agreed in the MoU 
between the EU and the Jordanian authorities. Moreover, the risks for the EU budget are in the 
first instance covered by the EU’s External Action Guarantee. 

Further, there are risks stemming from a possible weakening of the European and global economic 
environment  and  an  increase  in  regional  instability,  which  would  have  a  significant  effect  on 
Jordan’s fiscal and balance of payments situation. 

Having made a thorough assessment of the risks, the Commission considers that there are sufficient 
grounds and guarantees to proceed with the proposed MFA to Jordan.  

The  Commission  will  maintain  close  contacts  with  the  Jordanian  authorities  during  the 
implementation of the MFA in order to quickly address any concerns that may arise.  

4. 

ADDED VALUE OF EU INVOLVEMENT 

The EU’s financial support to Jordan reflects the country’s strategic importance to the EU in the 
context  of  the  European  Neighbourhood  Policy.  The  MFA  instrument  is  a  policy-based  crisis 
instrument to alleviate short- and medium-term external financial needs. As part of the overall EU 
package  of  assistance,  it  would  help  support  the  EU’s  objectives  of  economic  stability  and 
economic  development  in  Jordan.  By  supporting  the  authorities’  efforts  to  set  a  more  stable 
macroeconomic  framework  and  improve  economic  governance,  the  proposed  assistance  would 
help improve the effectiveness of other EU financial assistance to the country, including budget 
support operations. 

The  EU’s  MFA  would  also  complement  the  standard  EU  aid  packages  provided  under  the 
Neighbourhood, Development and International Cooperation Instrument (NDICI). By supporting 
the adoption by the Jordanian authorities of an appropriate framework for macroeconomic policy 
and structural reforms, the EU’s MFA would increase the added value and effectiveness of the 
EU’s  involvement  through  other  financial  instruments.  The  proposed  MFA  would  increase 
substantially the EU’s leverage on policymaking in Jordan, helping steer the country towards a 
reform trajectory that should restore macroeconomic stability, address governance problems and 
boost potential growth in the longer run. 

5. 

CHARACTERISTICS OF MACRO-FINANCIAL ASSISTANCE 

5.1 

Exceptional character and limited time frame 

The MFA operation would aim to support the restoration of a sustainable external finance situation 
for Jordan. It would run in parallel to the IMF’s EFF arrangement, with a staff-level agreement 
reached  on  9 November 2023  and  adopted  by  the  Executive  Board  on  10 January 2024.  The 

13 

 
 
proposed MFA would only be implemented if the IMF programme remains on track. Against this 
background and given the expected time of approval of the MFA, the assistance is expected to be 
implemented in 2024-2027. While based on current information, Jordan does not face an external 
financing gap in 2024, the disbursement of the first instalment could take place already in Q4 2024 
if  downside  risks  were  to  materialise  and  all  other  conditions  for  disbursement  are  fulfilled. 
Otherwise,  the  instalments  could  be  disbursed  evenly  over  the  availability  period  of  2.5  years 
starting in 2025. All disbursements are conditional on the IMF programme remaining on track and 
on  a  number  of  policy  measures  agreed  with  the  EU  and  listed  in  the  Memorandum  of 
Understanding underpinning the proposed MFA operation. While in the short term, the country 
faces  substantial  balance  of  payments  financing  needs,  the  macroeconomic  and  structural 
adjustment programme to be agreed with the IMF and supported by the proposed MFA is expected 
to gradually strengthen the country’s balance of payments and fiscal positions. 

5.2 

Political preconditions and EU-Jordan relations 

Countries that are covered by the European Neighbourhood Policy are eligible for MFA. A pre-
condition for granting MFA is that the eligible country respects effective democratic mechanisms, 
including a multi-party parliamentary system and the rule of law, and guarantees respect for human 
rights.  

Political  pre-condition:  Jordan  fulfils  the  political  preconditions  for  receiving  MFA.  It  has 
continued its political reform efforts to strengthen parliamentary democracy and the rule of law. 
In 2021, Jordan launched a political modernisation process aspiring to foster political participation 
of  women  and  young  people,  to  overcome  tribal  allegiance  and  encourage  the  formation  of 
nationwide programme-based political parties, introduced through amendments to the Elections 
and  Political  Parties  Laws.  In  2023,  the  government  amended  the  Labour  Code  in  line  with 
international human rights standards.   

While  significant  political,  security,  economic  and  social  challenges  remain,  and  despite  an 
increasingly  challenging  regional  context,  Jordan  is  making  steps  towards  a  more  effective 
democratic political system based on the rule of law and respect for human rights. The EU remains 
fully committed in supporting Jordan in  this challenging  transition  process.  In this context, the 
political pre-condition for MFA is considered to be satisfied5.  

EU-Jordanian relations: The EU and Jordan enjoy excellent relations and have been linked by 
an  Association  Agreement  since  2002  (advanced  status  since  2010).  In  2022,  they  signed  the 
Partnership Priorities (PPs), which aim to strengthen cooperation even further and will guide the 
partnership until 2027. The PPs are based on common values and dialogue, and promote reforms 
in areas such as good governance, the rule of law, human rights, security, social cohesion and equal 
opportunities for all, non-discrimination, environmental and climate protection, green economy, 
digitalisation, energy, water,  education, job creation,  macroeconomic stability and the business 
environment. 

5  A  more  detailed  assessment  of  Jordan’s  compliance  with  the  political  precondition,  provided  by  the  European 

External Action Service (EEAS), is reproduced in the Annex to this staff working document. 

14 

 
 
 
5.3 

Complementarity 

The proposed MFA would complement the assistance provided by other multilateral and bilateral 
donors in the context of the recent IMF programme, ensuring reasonable burden-sharing. The EU’s 
MFA would also complement EU support provided under the NDICI. By supporting the adoption 
by the Jordanian authorities of an appropriate framework for fiscal and macroeconomic policy and 
structural reforms, the EU’s MFA would increase the added value and effectiveness of the EU’s 
involvement through other financial instruments. The proposed MFA would increase substantially 
the EU’s leverage on policymaking in Jordan, helping steer the country towards a sustained reform 
trajectory to restore macroeconomic stability, address governance problems and boost potential 
growth in the longer run and in a sustainable manner. 

5.4 

Conditionality 

Disbursements under the proposed MFA operation will be conditional on successful programme 
reviews  under  the  IMF  programme.  In  addition,  the  Commission  and  the  Jordanian  authorities 
should agree on a specific set of structural reform measures, to be set out in a Memorandum of 
Understanding.  These  reform  measures  should  support  the  authorities’  reform  agenda  and 
complement the programmes agreed with the IMF, the World Bank and other donors, as well as 
the policy reform programmes financed by the EU’s under NDICI. They should be consistent with 
the  main  economic  reform  priorities  agreed  between  the  EU  and  Jordan  in  the  Association 
Agreement, the PPs, Jordan’s Economic Modernisation Vision and other strategic documents.   

The  Commission  will  seek  a  broad  consensus  with  the  Jordanian  authorities,  to  ensure  their 
ownership and foster smooth implementation of the agreed conditionality. These policy conditions 
should  address  some  of  the  fundamental  weaknesses  shown  over  the  years  by  the  Jordanian 
economy and economic governance system. Possible areas of conditionality could, in principle, 
include reforms to improve economic governance, including public finance management and tax 
administration, social and labour market policy, and governance and fight against fraud, corruption 
and money-laundering. 

5.5 

Financial discipline 

The  proposed  MFA  operation  for  Jordan  of  up  to  EUR 500 million  in  loans  is  planned  to  be 
disbursed  in  three  instalments  to  be  released  from  2025,  possibly  already  2024,  until  the 
programme  expires  in  2027.  The  required  provisioning  at  a  rate  of  9%  of  the  External  Action 
Guarantee will be programmed under the NDICI, for a total amount of EUR 45 million (budget 
line 14 02 01 70 ‘NDICI – Provisioning of the Common Provisioning Fund’).  

6.  EVALUATION AND COST-EFFECTIVENESS 

This assistance is of exceptional and macroeconomic nature and will be evaluated in line with the 
standard Commission procedures.  

15 

 
 
6.1 

Evaluation 

Ex post evaluations of MFA operations are envisaged in the multi-annual evaluation programme 
of  the  Commission’s  Directorate-General  for  Economic  and  Financial  Affairs.  An  ex post 
evaluation of the proposed MFA to Jordan will be launched within a period of 2 years after the 
availability period has expired. A provision for the ex post evaluation is included in the proposed 
Decision  for  the  assistance,  and  will  also  be  included  in  the  Memorandum  of  Understanding. 
Budget appropriations from the MFA grant budget line will be used for this evaluation.   

6.2 

Achieving cost-effectiveness 

The proposed assistance would entail a high degree of cost-effectiveness for several reasons. 

i)  Since the assistance would  be leveraged by  the assistance  provided by the international 
financial institutions, with which, as noted, it would be closely coordinated, its ultimate 
impact could be very significant compared to its cost. Moreover, in negotiating specific 
policy  conditions,  the  Commission  will  be  able  to  draw  on  the  expertise  of  these 
institutions, including the IMF and the World Bank, and to influence their conditionality 
as well in ways that will take into account the EU’s views.  

ii)  Providing coordinated macroeconomic support to Jordan on behalf of the EU countries, the 
MFA would be more cost-efficient than the provision of a similar total amount of financial 
support by EU Member States individually.  

iii) A substantial part of the proposed assistance would be provided in the form of loans, the 

budgetary impact of which is more limited. 

iv)  Finally,  the  Commission  will  aim  to  achieve  synergies  with  other  EU  policies  and 
instruments used to support the implementation by the beneficiary of the relevant measures.  

16 

 
 
 
 
 
 
ANNEX 

EUROPEAN EXTERNAL ACTION SERVICE 

Assessment of democracy, human rights, the rule of law and political reforms in 
Jordan 

Political reforms continue despite daunting challenges 

Under  the  leadership  of  the  King,  Jordan  is  currently  undergoing  a  three-track 
modernisation process (political, economic and public administration) that aims to build a 
party-based political system and a more representative electoral process (for the Lower 
House while the Senate remains entirely appointed), and to create up to one million new 
jobs in 10 years as well as an efficient public administration. The political modernisation 
aspires  to  foster  political participation  of  women and  young  people,  to  overcome  tribal 
allegiance and encourage the formation of nationwide programme-based political parties, 
introduced through amendments to the Elections and Political Parties Laws. Still, security 
remains Jordan’s overarching political priority. 

The  political  modernisation  process  will  be  gradually  introduced  over  three  electoral 
cycles,  starting  with  the  next  parliamentary  elections  in  early  autumn  2024.  Upon 
invitation by Jordanian authorities, preparations are ongoing to assess whether to send 
an EU election observation mission to accompany the legislative elections, as a sign of 
tangible  support  to  Jordan’s political modernisation  process  at  a  critical  juncture  when 
democratic principles are increasingly questioned.  

In 2023, the government took some steps to improve legislation in line with international 
human rights standards. Jordan amended the Labour Code to add the definition of sexual 
harassment in the workplace and provisions for the prohibition of discrimination, including 
in terms of equal pay between men and women. The Penal Code was also amended to 
strengthen fair trial guarantees and to extend community service and other alternatives 
to detention.  

However, significant challenges remain, especially in relation to freedom of expression 
(online and offline), as well as freedom of peaceful assembly and association, and the 
rule of law. In the context of a challenging security situation in the region, the space for 
civil  society  in  Jordan  has  steadily  shrunk  in  recent  years,  notably  through  legal  and 
administrative restrictions (including the recently amended  Cybercrime Law) as well as 
increased monitoring of activities of civil society organisations.  

17 

 
 
 
The administrative detention of peaceful activists also raised concerns regarding effective 
access to due process and fair trial guarantees. Jordan ranked 62nd out of 142 countries 
in the 2023 World Justice Project Rule of Law Index. Gender-based violence and lack of 
gender  equality  remain  issues  of  concern.  The  economic  participation  of  women 
remained very low, with the Kingdom ranking 126th out of 146 countries in the 2023 World 
Economic Forum Global Gender Gap Index, while discrimination of women persisted in 
the Personal Status Law, particularly as regards custodianship, divorce and inheritance 
of citizenship.  

The  EU  and  Jordan  held  the  13th  meeting  of  the  Subcommittee  on  Human  Rights, 
Democratisation and Governance on 6-7 March 2023 in Amman. The meeting provided 
an opportunity for the EU to underline the importance of ensuring an environment that is 
conducive to a thriving civil society, which can contribute to socio-economic development 
and political transformation, in line with the Royal recommendations for the modernisation 
of the political system.  

EU-Jordan relations 

The  EU  and  Jordan  enjoy  excellent  relations  and  have  been  linked  by  an  Association 
Agreement signed in 2002 (advanced status since 2010) and Partnership Priorities (2021-
2027) that have been jointly agreed at the EU-Jordan Association Council in June 2022 
in  Jordan.  These  Partnership  Priorities  centre  around  three  pillars,  and  include 
strengthening good governance, the rule of law, democratic reform and human rights.  

Jordan continues to be a strategically important partner of the EU in the Middle East, a 
voice of moderation and peace, including on the Middle East peace process. Jordan also 
plays  a  very  positive  role  in  ensuring  the  Southern  co-ownership  of  the  Union  for  the 
Mediterranean, co-chaired with the EU since 2012. 

A key concern of Jordan is the ongoing war in Gaza, which is affecting the Hashemite 
Kingdom  on  all  fronts:  politically,  economically and  socially.  Since  the  start of the  war, 
Jordan  has  stepped  up  its  diplomatic  outreach  with  the  EU,  including  through  King 
Abdullah II’s visit to Brussels in November 2023, which was followed by several high-level 
contacts with the President of the European Commission, the President of the European 
Council and the High Representative. Against the backdrop of  a looming humanitarian 
crisis,  the  EU  is  determined  to  support  Jordan’s  humanitarian  efforts  and  assists  the 
country  in  weathering  the  economic  fallout  from  this  and  other  neighbouring  crisis, 
including via a new Macro-Financial Assistance, as discussed during the visit of President 
von der Leyen with King Abdullah II on 18 November 2023 in Amman.  

18 

 
 
 
The  13th  EU-  Jordan  Association  Committee  held  on  6  February  2024  in  Amman  thus 
offered  an  important  opportunity  for  the  EU  to  reconfirm  its  commitment  to  continue 
supporting Jordan in tackling the manifold challenges. The meeting also reconfirmed the 
mutual willingness to continue working together to foster stability, peace and security in 
the Middle East.  

In sum, while major political, security, economic and social challenges remain, despite an 
increasingly  challenging  regional  context,  Jordan  is  making  steps  towards  a  more 
effective  democratic  political  system  based  on  the  rule  of  law  and  respect  for  human 
rights. The EU remains fully committed in supporting Jordan in this challenging transition 
process.  In  this  context,  the  political  preconditions  for  Macro-financial  assistance  are 
considered to be satisfied.  

19