Considerations on COM(2024)159 -

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dossier COM(2024)159 - .
document COM(2024)159
date April  8, 2024
 
(1) Relations between the European Union (‘the Union’) and the Hashemite Kingdom of Jordan (‘Jordan’) are developing within the framework of the European Neighbourhood Policy (ENP). The Union and Jordan signed an Association Agreement on 24 November 1997, which entered into force on 1 May 20029. 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 Union and Jordan that entails expanded areas of cooperation. A protocol on Dispute Settlement Mechanisms for trade between the Union 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 and the EU-Jordan Partnership Priorities adopted for 2022-2027.

(2) 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.

(3) The Jordanian economy has suffered significantly from protracted conflicts in the region, notably in neighbouring Syria, and most recently in Israel/Gaza and the Red Sea. Since the start of the war in Syria, 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. In addition to regional instability, the macroeconomic and fiscal challenges related to the COVID-19 pandemic in 2020/2021, commodity price developments following Russia’s invasion of Ukraine in 2022, high exposure to trade fluctuations and the increase of borrowing costs for emerging markets globally continued to weigh on the Jordanian economy. As a result, Jordan experienced an economic contraction in 2020, followed by a slow economic recovery, as unemployment increased significantly in 2020 and remained high, and new fiscal and external financing needs emerged.

(4) The war in Israel-Gaza that started in October 2023 implies very substantial downside risk to the economic outlook, in particular due to the increased level of uncertainty in the region and the possible impact on the important tourism sector and consumer sentiment. The ongoing Houthi attacks on cargo and energy vessels in the Red Sea hinder vessel traffic to Asia, impacting Jordan’s exports, in particular the mineral and chemicals exports, and imports.In January 2024, the Jordanian authorities and the IMF agreed on a new economic adjustment programme supported by a four-year Extended Fund Facility (EFF) in the amount of USD 1.2 billion, which followed a USD 1.7 billion four-year EFF, including a loan under the Rapid Financing Instrument, from 2020-2023.

(5) In January 2020, the Union adopted a third programme of macro-financial assistance (MFA-III)10 of EUR 500 million in the form of loans, in response to a request from Jordan in July 2019 and following the completion of a second MFA (of EUR 200 million) in 2019. MFA-II11 came as a follow-up to MFA-I12 (of EUR 180 million) implemented in 2015. MFA-III was topped up in a Union decision in May 2020 by EUR 200 million in response to the socio-economic fallout of the COVID-19 pandemic. The first instalment of MFA-III was released on 25 October 2020, the second instalment on 20 July 2021, the third instalment on 3 May 2023, following the implementation of the agreed policy measures. The assistance was fully disbursed during 2020-2023.

(6) MFA-III 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, committed to submit, if appropriate, a new proposal for extending and increasing MFA to Jordan, provided that the usual requirements for this type of assistance, including its exceptional character, political preconditions, complementarity, conditionality and financial discipline an updated assessment by the Commission of Jordan’s external financing needs, are met.

(7) In this challenging context, the Union and the international community expressed again the commitment to supporting Jordan on several subsequent occasions, notably during annual Brussels Conferences on “Supporting the Future of Syria and the region” and the EU-Jordan Association Council in June 2022.

(8) Since the beginning of the Syrian crisis in 2011, the Union has made available approximately EUR 3.5 billion to Jordan under different instruments (including EUR 1 080 million under the three aforementioned MFA operations) to help the country preserve economic stability, sustain political and economic reform and address its related humanitarian, development and security needs. In addition, the European Investment Bank has allocated around EUR 1.1 billion in project loans to Jordan since 2011.

(9) For the period 2021-2024, EU bilateral indicative allocation (grants) under the Neighbourhood Development and International Cooperation Instrument – Global Europe (NDICI-GE) to Jordan amounts to EUR 364 million and is complemented by EU support to help Jordan address the impact of the Syrian crisis (EUR 214 million from 2021 to 2023) as well as other regional and thematic programmes. During the period 2014-2020, the EU provided support to Jordan mainly through the European Neighbourhood Instrument with EUR 765 million. During the same period, Jordan also benefitted from additional EUR 126 million channelled via the Neighbourhood Investment Platform (NIP), which leveraged around EUR 580 million in investments.

(10) In October 2023, in view of the still difficult economic situation and outlook, Jordan requested additional macro-financial assistance from the Union.

(11) The IMF Board approved a new four-year Extended Fund Facility in January 2024. The first review mission is scheduled for April 2024, with a mission report expected to be published in June 2024.

(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 immediate external financing needs and should underpin 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.

(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 Union’s macro-financial assistance is expected to go hand-in-hand with the implementation of budget support operations under NDICI-GE established by Regulation (EU) 2021/947 of the European Parliament and of the Council13.

(17) 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.

(18) 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.

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

(20) 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.

(21) 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 pre-conditions and the achievement of those objectives should be regularly monitored by the Commission and the EEAS.

(22) 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, a loan agreement to be concluded between the Commission and the Jordanian authorities should contain provisions authorising European Anti-Fraud Office (OLAF) to carry out investigations, including on-the-spot checks and inspections, in accordance with the provisions and procedures laid down in Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council14 and Council Regulation (Euratom, EC) No 2185/96615, the Commission and the Court of Auditors to carry out audits and the European Public Prosecutor’s Office to exercise its competences with regard to the provision of the Union’s macro-financial assistance during and after its availability period.

(23) Release of the Union’s macro-financial assistance is without prejudice to the powers of the European Parliament and the Council (as budgetary authority).

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

(25) 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.

(26) 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 Council16.

(27) 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 of the Memorandum of Understanding, and to any reduction, suspension or cancellation of the assistance.