Jordan: Additional Financing for Inclusive, Transparent and Climate Responsive Investments Program

approved

The original Program of USD250 million, co-financed with the World Bank, was approved by AIIB's Board of Directors on August 26, 2021, and became effective on November 15, 2021, with an objective to improve accountability to foster climate responsive investments and growth during and after the COVID-19 pandemic. It consists of three results areas (RAs): (i) improving the accountability and fiscal space for public investment, including towards national climate goals; (ii) improving business enabling environment and the capacity of key institutions to attract private investment and climate finance, including for tourism sector; and (iii) generating evidence and data for policy making, implementation, and stakeholder dialogue. AIIB financing is involved in RA 1 and RA 2 only.  The original Program has achieved strong results in the first year of implementation, with notable progress on Program objective-level indicators, most disbursement-linked results (DLRs) for 2021 and 2022 met and disbursements ahead of schedule. Despite its strong performance, the original Program has been impacted by challenges experienced in 2022, such as high food and fuel prices. The challenges led GOJ to reallocate fiscal resources to social protection and subsidies at the cost of capital spending. Also, timebound DLRs on investment incentives and promotion should be revised to align with the enacted legal provisions of the 2022 Investment Environment law and 2023 subsidiary legislation, including with regard to targeted investment incentives to promote participation of Jordanian women in the workforce. In October 2022, the Government of Jordan requested AIIB to provide an AF of USD200 million to scale up the operation and restructure the original Program in light of the recent institutional reorganization and policy shifts in the past year. In parallel, the Government requested for USD 400 million from the World Bank, the lead co-financier of the original Program. The Loan from the World Bank was already approved in April 2023.  The proposed AF aims to enhance the development effectiveness and fiscal sustainability of public investment, to increase support to climate responsive public and private investment, including by mobilizing green financing and climate finance, to create job and business opportunities for women, and to improve government effectiveness and social accountability through participatory policy making based on data. It is highly aligned with the Government's strategy and will call for a significant increase in both public and private investment, especially in green and climate friendly areas, making the economy more resilient.