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Strengthening and maintaining macroeconomic stability

Interview - June 4, 2019

The Worldfolio sat down with HE Dr. Fariz to discuss fiscal reform in Jordan, efforts to improve financial inclusion and his main objectives as Governor of the Central Bank.



Public dissatisfaction with the economy is probably the most pressing concern for the Jordanian monarchy. Due to this, the government works with the International Monetary Fund in fiscal reforms to address a public debt that reached 94.4% of the GDP. What have been the results of these fiscal reforms?

Over the past years, the government continued to implement its national economic and structural reform program, in cooperation with the International Monetary Fund (IMF), aiming at strengthening fiscal and external positions, reducing vulnerabilities, and maintaining macroeconomic stability. Accordingly, the government has taken a bundle of corrective fiscal measures to adjust fiscal positions, and enhance domestic revenues through mitigating distortions in the tax system, caused by the unjustified expansion in tax exemption – in addition to rationalizing non-priority current spending (particularly reducing purchases of goods and services) and non-priority expenditures, in addition to prioritizing social and capital spending.

The implemented fiscal reforms have resulted in an improvement in the performance of public finance, as the overall fiscal deficit of the general budget, including grants, declined by 5.9 percentage points, to reach 2.4 percent of GDP in 2018, down from 8.3 percent of GDP in 2012.

On the public debt side, the reforms aim at stabilizing Jordan’s public debt through putting it, gradually, on a downward path and then placing it on a sustainable path. The debt to GDP ratio declined to 94.4 percent at the end of 2018, and it is expected to reach 83.7 percent in 2024. Within this context, Jordan updated the Medium-term Public Debt Management Strategy (2018-2022) that had been adopted first in 2016, aiming at sustaining public debt and bringing it as a percent of GDP to lower and stable levels.

Owing to the disruptions of Egyptian gas supply, resulting from the political and social events in the region, accompanied by the necessary shift towards a high-cost alternative fuel (diesel and heavy fuel oil), the National Electric Power Company (NEPCO) started recording large losses in 2012. Within the national economic reform program, the Jordanian government has announced a Medium-term Electricity/EnergyStrategy in 2013, including a timetable and measures to bring NEPCO back to cost recovery. NEPCO has succeeded in achieving an operational profit in 2016 and 2017. The profit resulted from switching the primary source of energy from fuel to liquefied natural gas (LNG) along with the fall in generation cost due to the decline in oil prices. The total debt of NEPCO amounted to JD 5.3 billion at the end of 2018, accounting for 18.8 percent of gross public debt.


Around 67% of the Jordanian population has no access to financial services. How will financial inclusion further enhance the development of Jordan’s economic landscape?

Being financially excluded limits the individuals’ response to day-to-day needs and deprives people from being an active player in the economy. Enhancing financial access through quality services and access to savings, insurance, finance and more can equip people to think of opportunities that can improve their quality of living. The CBJ focuses on financial sectors that can allow people to seize economic opportunities like, SMEs funding, microfinance, digital financial services, and other cross cutting enablers like consumer protection and financial capabilities. Financial access is based on understanding financial services and builds adequate financial literacy to become a responsible financial consumer, hence obtaining required financing for productive projects, businesses, and innovative ideas.

Leveraging on available infrastructure, like digital financial services, provides individuals and businesses with innovative and efficient tools to equip businesses with solutions that can enhance the business flow and endure efficiency in the business cycle. Furthermore, supporting financial institutions to increase their portfolios of lending to SMEs can help people, particularly youth and women, to obtain funds for mature business plans, thus enhancing the economic landscape and create jobs. In addition, increasing financial literacy can enhance the ability of people to save, which makes them more resilient to face emergencies and absorb financial shocks.

Overall, to become a productive member in the economy, financial access is a right for people to expand their horizon.


As the central bank governor, what main actions do you want to take in the coming years?

In light of the importance of an effective legislative framework for the financial system, and the need to constantly update legislations in congruence with the latest development locally and globally, a royal decree was issued approving the Central Bank Law Amendment in 2016, aiming at the expansion of CBJ's objectives by adding financial stability, as an additional objective along with monetary stability. The amendments have strengthened the CBJ's contribution in sustaining financial stability, in addition to expanding its supervisory jurisdiction to include the insurance, electronic payment systems and microfinance sectors.  

The CBJ will continue maintaining monetary and financial stability as its main objective, thereby contributing to economic growth in the kingdom. Enhancing investment environment by providing a convenient interest rate structure and launching many initiatives to guarantee the availability of appropriate financing to private sector, mainly SMEs, in addition to implementing macro and micro prudential supervision policies help maintain financial and banking stability, hence motivating economic and social development.

The CBJ also established a Jordanian fund for entrepreneurship in cooperation with the World Bankin the amount of US$98 million to support the start-ups, small and medium sized. The World Bank is contributing US$50 million for the fund, while the central bank is providing US$48 million.

Within this context, the CBJ developed the National Financial Inclusion Strategy 2018-2020 in order to increase financial inclusion from 33.1% to 41.5% by 2020, covering youth, women, low-income segments, SMEs and refugees. This represent the “high level” of commitment of state institutions and the government to create a legislative and technical environment that enables individuals and institutions to save, invest and obtain the necessary funds. 

Furthermore, aiming at preserving the financial stability, the CBJ has expanded its supervision umbrella to include the insurance companies and the microfinance institutions besides banks and exchange companies.