In January 2006, the International Monetary Fund (IMF) published a Report on the Observance of Standards and Codes (ROSC) on Fiscal Transparency in Jordan. The report acknowledges that Jordan has made significant progress over recent years, but fails to meet various requirements of the IMF's Code of Fiscal Transparency. In order to approach international good practices for fiscal transparency, Jordan will have to embark on a broad and sustained effort. This effort seems to be on the way. Oxford Analytica asserts that the government is now more committed to reform than in the past, when it preferred to suggest change rather than implement it. Jordan intends to subscribe to the IMF's Special Data Dissemination Standard (SDDS) by the middle of 2007 and is already a participant in the IMF's General Data Dissemination System. Further, according to the IMF, the government has initiated a number of reform processes, such as an improved medium-term framework and revised budget classifications during recent years that are likely to have major implications for fiscal transparency when they are successfully implemented.

General Overview

In January 2006, the International Monetary Fund (IMF) published a Report on the Observance of Standards and Codes (ROSC) on Fiscal Transparency in Jordan. The report acknowledges that Jordan has made significant progress over recent years, but fails to meet various requirements of the IMF's Code of Fiscal Transparency. In order to approach international good practices for fiscal transparency, Jordan will have to embark on a broad and sustained effort, according to the IMF's assessment team.

Notwithstanding the need for major reforms, both the IMF, and Oxford Analytica (OA), which rates Jordan's compliance with the IMF Code as "Enacted", concur that Jordan has taken important steps over the last years to increase fiscal transparency. OA also asserts that the "the government is now more committed to reform than in the past, when it preferred to suggest change rather than implement it" (p. 256). The authorities have introduced a debt target to anchor the medium-term fiscal framework and undertook reforms regarding budget coverage and classification (IMF 2007, p. 1) The Public Sector Reform, a program to streamline and rationalize ministries and departments and the Financial Management Reform Program, aimed results-oriented budgeting are progressing well, according to OA (2006). The privatization process, started in 1996 is ongoing, and OA reports that in 2006, five more companies, including Jordan Telecom were privatized. The Executive Privatization Commission published its first assessment of the impact of privatization. Furthermore, the IMF's 2006 Article IV Consultation report, published in 2007, stated that Jordan intends to subscribe to the International Monetary Fund's (IMF) Special Data Dissemination Standard (SDDS) by the middle of 2007 and is already a participant in the IMF's General Data Dissemination System (GDDS) (IMF 2007).

Overall, the 2007 IMF report concluded that fiscal management has a rather comprehensive basis in Jordan, however, the enforcement of the legislation is judged to be weak. In particular, the IMF criticized that the definition of government is not consistent with the Government Finance Statistics (GFS) format, thereby excluding many important government activities. Furthermore, the preparation, execution and reporting of the budget still falls short of the Code and mechanisms for the external scrutiny of the process need to be improved.

Ibrahim Saif assessed Jordan for the International Budget Project's (IBP) 2006 Open Budget Initiative (OBI). The Index evaluates the quantity of information provided to citizens in the seven key budget documents that all governments should make public during the course of the budget year. Jordan published four of these documents, and receives an overall score of 50% regarding its budget openness.

In order to improve fiscal transparency in Jordan, the 2007 IMF report recommended that the immediate priority should be to "complete ongoing reform efforts, which would facilitate significant improvements in the openness of budget preparation, execution and reporting. During recent years, the government has initiated a number of reform processes that are likely to have major implications for fiscal transparency when they are successfully implemented". (p. 25) Among the recommended initiatives are a macrofiscal unit in the Ministry of Finance (MoF) to improve the medium-term budget framework, a revised budget classification that should provide a better basis for the allocation of government funds, and a functional, single treasury account that would improve the mechanisms for budget control and management (p. 25). The IMF also claims that a number of fairly simple measures -- given that substantial information is already available, but not compiled in a meaningful and systematic manner -- could lead to measurable improvements in fiscal transparency. Among these measures are the establishment of clear procedures and timetables and an explicit analysis of budget estimates and outcomes.

In the medium term, the IMF identifies three main challenges to improve fiscal transparency. These are: (1) to clearly distinguish the government and the public sector in general from the rest of the economy so fiscal policy can be appropriately designed and accounted for; (2) to enable and facilitate legislative and public debate over fiscal policy, the transparency of fiscal management needs to be increased, e.g. by widening the focus of budget coverage and disclosing all cabinet's fiscal policy decisions, and (3) to establish mechanisms to ensure the integrity of fiscal information by concentrating the budget execution process in the MoF and adopting comprehensive government accounting standards.

Regarding actual fiscal policy, the IMF's 2007 report notes that the authorities intend to base their policies on achieving a public debt-to-GDP ceiling of 60 percent by 2011. This would include updating the Public Debt Law's existing 80 percent limit, which was instrumental in securing past adjustments. The IMF staff notes that "at a minimum, meeting the new target will likely imply overall budget deficits (including grants) not exceeding 31/2 percent of GDP a year over the medium term" (p. 11). The draft budget for 2007, presented to the IMF team, was consistent with this medium-term target.

The Principles

Clarity of roles and responsibilities.

EN

OA, in its 2006 Report on Fiscal Policy Transparency in Jordan, rates Jordan's compliance with this principle as "Compliance in Progress". However, the 2006 IMF ROSC notes that while "the legislative basis for fiscal management in Jordan is quite comprehensive, and the legislation in itself meets or is close to meeting several basic requirements of the fiscal transparency code ... in many areas, there are weaknesses in enforcement of the legislation, and actual practices often lag behind legislative statutes". (p. 24) Moreover, the IMF assessment team noted, "the structure of government, and the role of different government bodies, are quite clearly defined in law, but the definition of government is not fully consistent with GFS and excludes many important government activities. Quasi-fiscal activities of the CBJ and public institutions are limited. There is no clear legal framework for Public Private Partnerships (PPPs). There is an extensive legislative basis for budget management and taxation, and ethical standards for civil servants. The relations between central and local government are also comprehensively described in law" (p. 24).

Open budget processes

ID

OA, in its 2006 Report on Fiscal Policy Transparency in Jordan, rates Jordan's compliance with this principle as "Enacted". Yet the IMF, in the 2006 ROSC on Fiscal Transparency in Jordan, notes that "the framework for budget preparation, execution and reporting has improved in recent years, but does not yet meet the requirements of the fiscal transparency code in most areas. The budget documents are quite comprehensive, but do not include a macroeconomic framework, clear application of fiscal rules, or identification of new policies or important fiscal risks. Procurement and employment regulations are quite clear. There are shortcomings in the budget classification, as well as in budget execution and reporting" (p. 24).

The 2007 IMF report adds that successful implementation of ongoing reform processes such as the establishment of a macrofiscal unit in the MoF to improve the medium-term budget framework and a revised budget classification that should provide a better basis for the allocation of government funds are supposed to have major positive implications for the transparency of budget preparation, execution and reporting (p. 25).

Public availability of information.

ID

OA, in its 2006 Report on Fiscal Policy Transparency in Jordan, rates Jordan's compliance with this principle as "Enacted". The 2006 IMF ROSC notes that Fiscal data are often available within the government, but are not systematically compiled and disseminated to the public at the general government level. However, "the new MoF bulletin should improve disclosure considerably. Mechanisms for ensuring fiscal data quality need to be improved, whereas arrangements for external scrutiny of the budget process are mixed. Budget estimates are not reliable, and accounting standards and reconciliation methods are inadequate. The Audit Bureau (AB) is closely involved in government procurement activities. The Statistics agency has substantial technical independence, though more de facto than de jure" (pp. 24, 25).

Independent assurances of integrity.

ID

OA in its 2006 Report on Fiscal Policy Transparency in Jordan, rates Jordan's compliance with this principle as "Intent Declared." Jordan has expressed its intention to subscribe to the IMF's SDDS by the middle of 2007 and, according to the IMF GDDS website, is already a participant in the IMF's General Data Dissemination System.

In its 2006 ROSC, the IMF assessment team criticized that initial budget estimates were not reliable, divergences between estimates and actual outcomes are not disclosed to the public, no statements on accounting policy are included in the budget and the processes of the reconciliation of accounts between the various ministries is only partly effective. Furthermore, the IMF team notes, the external audit of the budget is not yet fully independent of the executive branch and in general, a strengthening of the audit capacity of the Audit Bureau seems necessary. Moreover, the National Statistics office still lacks legal independent status.