The Exchange May 13-15, 2013 Abu Dhabi, United Arab Emirates, 1
Slide 2 Background Information. The Economic Crisis (1988-1989).
Jordan's Economic Adjustment Programs 1989-2004. Major Pillars Main
Objectives Main Achievements. National Program 2004-2009 Main
Components and Objectives Public Sector Reform Current Challenges.
Slide 3 Background Information 3 The Jordanian Economy is an Open
Small Country with a vision toward a Market-Oriented approach with
Abundant Skilled Human Resources despite the Limited Natural
Resources. Population: 6.38 million in 2012. Geographical Area:
89.3 Thousand Sq.Km. Upper Middle-Income Country : Nominal
Percapita Income $4849.8 in 2012. Slide 4 The Economic Crisis 1988-
1989 4 Main Features Deterioration of real GDP growth ( -13.4% ).
Double-digit inflation rate ( 25.7% ). Aggravation of external debt
190% of GDP. Mounting budget deficit 20.8% of GDP before grants and
10.1% of GDP after grants. Severe depletion of foreign exchange
reserves. Sharp devaluation of the Jordanian dinar. Slide 5 The
Economic Crisis 1988-1989 5 Main Causes External Shocks Sharp fall
in grants. Remarkable reduction in workers' remittances and
national exports to Arab oil producing countries. Internal Factors
Expansion of public sector. Intensive government subsidies.
Inefficient tax system and trade regime. High levels of Borrowing
from the Central Bank. Slide 6 Jordans Economic Adjustment Programs
1989-2004 6 Jordan has been implementing comprehensive economic
adjustment programs since 1989. It has adopted sex IMF-supported
programs during the period 1989-2004 before its "graduation" from
such programs in July 2004. Slide 7 Jordans Economic Adjustment
Programs 1989-2004 7 Major Pillars Attaining macroeconomic
stabilization to effectively mange demand side in the Jordanian
economy. Implementing structural reforms to strengthen the supply
side of the national economy Slide 8 Key Reform Measures by Sector
8 Public Expenditures Removing subsidies and building a social
safety net. Controlling employees payrolls. Rationalizing govt.
procurements of goods and services. Reforming the pension system.
Adopting a national privatization program. Slide 9 Jordans Economic
Adjustment Programs 1989-2004 9 Main Objectives Reducing the budget
and current account deficits. Controlling inflation rates.
Rebuilding CBJ foreign reserves. Achieving sustainable growth.
Slide 10 Key Reform Measures by Sector 10 Public Revenues gradually
Reform tax system eventually leading to the application of
VAT(Applying general sales tax in 1994). Lowering income tax rates
(Highest 45%). Merging the Income Tax and the General Sales Tax
(GST) Departments into a single department. Gradual liberalization
of foreign trade and tariff structure reform (Reducing the custom
tariff ceiling to 30%). Raising prices of petroleum products. Slide
11 Key Reform Measures by Sector 11 Public Debt Enacting a new
Public Debt Law. Rescheduling external debt. Stopping borrowing
from commercial creditors. Concluding debt swap and debt repurchase
agreements. Writing-off part of external debt (Paris and London
Clubs). Shifting towards internal public debt through issuing
treasury bills and bonds. Early repayment of Brady bonds. Slide 12
Key Reform Measures by Sector 12 Investment Promotion Upgrading the
investment institutional framework. Simplifying the investment
procedures through activating the one-stop shop. This facility has
reduced the registration required period from 98 working days to 36
working days and then to 11 working days. Developing the investment
incentive regime. Slide 13 Key Reform Measures by Sector 13
Monetary and Financial Sector Fully liberalizing interest rates
structure. Shifting towards indirect monetary policy. Implementing
full convertibility for both current and capital transactions.
Pegging the Jordanian dinar to the US dollar (1995). Strengthening
banks supervision and regulation. Enacting modern banking law.
Increasing the minimum banks paid up capital. Slide 14 Key Reform
Measures by Sector 14 Monetary and Financial Sector cont.
Increasing the capital adequacy ratio. Activating competition among
banks. Creating Jordan deposit insurance corporation. Separating
regulatory functions from operational functions in Amman financial
market. Modernizing Amman financial market and creating central
settlements and securities depository. Slide 15 Key Reform Measures
by Sector 15 External Sector Improving the efficiency of Customs
Administration, gradually reducing the tariff rates and exempting
the industrial production inputs. Eliminating state monopoly in
trade sector and opening it to the private sector. Concluding
several important multilateral and bilateral trade agreements, such
as with the WTO,EU and US Free Trade Area, QIZs. Slide 16 Key
Reform Measures by Sector During the period 1990-2004, Jordan
enacted many new laws and bylaws and amended existing ones in
various sectors. The following are some of the most important
examples: Competition Law Telecommunication and Electricity Laws
Electronic Transaction Law Customs Law Companies Law Securities Law
Public Debt Law Banking Law Leasing Finance Law General Sales Tax
Law Privatization Law Investment Promotion Law Income Tax Law 16
Slide 17 Jordans Main Achievements 17 20041989 7.0-13.4Real GDP
Growth 3.425.7Inflation (% CPI) -3.3-10.1Overall Budget Balance
(after grants) in % of GDP 4824130Foreign Exchange Reserves ($
million) 68.9190External Debt in % of GDP 0.8-10.0Current Account
Deficit in % of GDP 36.526.0Merchandise exports in % of GDP Slide
18 2004-2009 18 Challenges Heavy burden of outstanding external
debt, despite the substantial reduction in debt-to- GDP ratio. High
levels of Poverty and Unemployment. Vulnerability to external
shocks steaming from the region. Slide 19 National Reform Program
2009-2005 19 Main Components and Objectives Maintaining and
reinforcing achievements made under the completed IMF supported
programs. Enhancing self-reliance. Reducing unemployment and
poverty rates. Strengthening resilience of Jordans economy against
external shocks. Improving the competitive position of the
Jordanian economy. Deepening the domestic financial market through
diversification of financial instruments and strengthening
institutions and regulations Slide 20 20 Slide 21 The Strategy of
Financial Reform 2007-2004 21 In order to participate in government
efforts of reforming the Public Sector (PSR), the Ministry of
Finance has adopted a comprehensive strategy for the period
2004-2007 as one of the major elements of PSR. Slide 22 The
Strategy of Financial Reform 22 The Vision Highly effective &
efficient financial management. The Mission Meeting the development
needs of the Kingdom through, securing financial resources, setting
spending priorities, managing public debt and financial
commitments, and providing suitable services for both public and
private sectors. Slide 23 The Strategy of Financial Reform 23 The
strategy was build upon a mission of the IMF/ WB, This mission was
with aim to enhance: Participation and common commitment
Transparency and disclosure Integrity & Honesty Equity and
objectivity Responsibility and accountability Self dependence Slide
24 24 Slide 25 Aims of Financial Reform 25 With support from the
IMF, World Bank, USAID, GTZ (now GIZ) and other donors, Jordan has
taken many steps to strengthen fiscal policy and its management in
order to: Increasing the efficiency of the planning, preparation
and execution of the budget in line with national priorities. Slide
26 Financial Management Reforms including: 26 1. Medium Term Fiscal
Framework (MTFF). 2. Result Oriented Budgeting (ROB). 3. Treasury
Single Account (TSA). 4. Budget Classification (GFS 2001). 5. Cash
Flow Management (CFM). 6. Government Information System (GFMIS). 7.
E- Accounting, E- Procurement, E-Payment. 8. Public Expenditure
Review (PER). 9. Institutional Capacity Building and Human
Resources Development 10. Lands and Registration Taxes Slide 27
Public Financial Management (PFM) reforms recommended by the 2009
IMF/World Bank mission to Jordan 27 The main achievements include:
adoption of a revised budget calendar providing more time for
expenditure review and strategy analysis; deepening
results-oriented budgeting (RoB) by further improving the
definition of ministry and program level objectives, performance
targets and indicators; aligning the government capital spending
program and the Executive Program; introducing a new macroeconomic
forecasting model scheduled to be fully Extending the treasury
single account (TSA) coverage to budget and trust accounts in
commercial banks and transferring most government revenues in
commercial banks to the TSA on a daily basis; and expanding the
scope of the Government Financial Management Information System
(GFMIS) project to include budget preparation thus paving the way
for an integrated approach in improving PFM. Slide 28 PFM reforms
revised action plan 28 In 2011 PFM reforms recommended by the 2009
mission and suggested changes to the action plan and timeline for
their implementation. The revised action plan also identifies
existing and currently planned donor support in PFM by the IMF,
including METAC and the World Bank (WB), as well as by USAID,6 the
EU, and GTZ. The main reform objectives that remain are, to: (i)
strengthen the management of there form process, by addressing its
persistent fragmentation, both from the authorities and donors
side; (ii) establish an integrated budget planning and management
process that effectively links policies to public resource
allocation; and (iii) further develop treasury systems, including
government banking arrangements, commitment controls; cash
management and GFMIS Slide 29 New program 2011 29 The program will
have three main objectives: First, to restore macroeconomic and
financial stability. The program seeks to implement sustainable
fiscal, monetary and financial and structural policies Second, to
make policies more equitable and inclusive. Third, to support
growth and the medium-term external position by improving the
investment climate through targeted structural reforms. Slide 30
strengthen public financial management (PFM) 30 Over the past two
years, we simplified our budget preparation calendar; compiled a
comprehensive Budget Manual; enhanced expenditure analysis capacity
with the publication of Public Expenditure Perspectives; provided
extensive training for our staff on the Government Financial
Management Information System (GFMIS), Key Performance Indicators
(KPIs) and Results-oriented Budgeting (RoB). In the context of our
on-going reform plan. Improve our cash management and Commitment
Control System (CCS) In particular, we will introduce a commitment
control system through the GFSM to register, report and account for
expenditure commitments against [monthly] cash allocations
Accelerate the rollout of the GFMIS and TSA, especially the CCS
module in GFMIS. Slide 31 31 Slide 32 32 Aims of Financial Reform
With support from the IMF, World Bank, USAID, GTZ and other donors,
Jordan has taken many steps to strengthen fiscal policy and its
management in order to: Increasing the efficiency of the planning,
preparation and execution of the budget in line with national
priorities. Slide 33 33 Financial Management Reforms including: 1.
Medium Term Fiscal Framework (MTFF). 2. Result Oriented Budgeting
(ROB). 3. Treasury Single Account (TSA). 4. Budget Classification
(GFS 2001). 5. Cash Flow Management (CFM). 6. Government
Information System (GFMIS). 7. E- Accounting, E- Procurement,
E-Payment. 8. Public Expenditure Review (PER). 9. Institutional
Capacity Building and Human Resources Development 10. Lands and
Registration Taxes Slide 34 34 1. Medium Term Fiscal Framework
(MTFF) Aims: Improving the Medium Term Fiscal Framework MTFF
preparation process. Forecasting the budget over short and med term
using modern approaches and throw away the traditional way in
allocating expenditure and thus by defining the overall spending
ceiling and the partial ceilings. Slide 35 35 2. Result Oriented
Budgeting (ROB) Aims: Implement the result oriented budgeting
concept in all line ministries and government institutions Link the
government expenditures with targeted results through the adoption
of key performance indicators in line with the concept of ROB.
Slide 36 36 3.Treasury Single Account (TSA) Aims: Establish Single
Treasury Account for all government accounts at the commercial
banks and Central Bank and unifying it under one single account to
be controlled by the Ministry of Finance. Slide 37 37 4. Budget
Classification (GFS 2001). Aims: Improve the budget classification
in accordance with the best international standards that supports
transparency and clearness to help in analyzing and controlling the
budget and decision-making. Slide 38 38 5. Cash Flow Management
(CFM) Aims: Attaining effective management of treasury accounts
through Increasing the efficiency of the treasury cash flows.
Allocating needed liquidity through improving the monthly cash flow
plans Slide 39 39 6. Government Financial Management Information
System - GFMIS Aims: Computerizing the general budget systems and
link all budget units with MOF Improving transparency through
building an information system and a central database covering the
central government financial activities Slide 40 40 7.
E-Accounting, E-Payment and E- Procurement Aims: To support the
country's public administrative reform process to set up a modern
unified government-wide e-accounting, e-procurement and e-payment
system in order to: Reducing transaction costs and time and
Building up data base for revenues according to it sources
Increasing the efficiency of the public procurement. Simplify
revenue collection procedures, enhance the level of service
provided, and reduce the size of personal mistakes. Slide 41 41 8.
Public Expenditures Review (PER) Aims: Review annually the main
sectors expenditures to evaluate it and increase efficiency of
resources. Slide 42 42 9. Institutional Capacity Building and Human
Resources Development Aims: Establish the training center and
provide necessary training for MOF and related departments
employees Increase the matching between the job description
matching and the employees qualification Slide 43 43 10. Lands and
Registration Taxes Aims Improving the qualifications of government
Qualify staff working in fields related to property tax. Make
amendments to concerned legislation Establish a unified database
for property taxes Delegate the Minister's authorities to the
municipalities. Improve level of services to citizens. Improve tax
collection. Slide 44 44 What we want and still? Providing financial
assistant and know-how, Sharing experiences and capacity building
on best practices and lessons learned from others in financial
reform Slide 45 Concluding Remarks 45 We strongly believe that
Jordans comprehensive economic adjustment path since 1989 has been
hard but fruitful domestic efforts supported by the international
community. This positive outcome gives us convincing reasons for
confidence that Jordan will be able to meet remaining challenges,
accumulate achievements, in spite of the challenges and obstacles,
we emerge as an example for a small country looking for the
attainment of sustainable economic growth. Slide 46 46
