Jordan Energy and Water Development Policy Loan

Improving the efficiency of the water and energy sectors, and the consequent savings, will provide the Government with the fiscal space needed to invest more in economic development projects and improve the living conditions of citizens.

Dr. H.E. Imad Fakhoury-Minister of Planning and International Cooperation Jordan

Implementation Support Agency: World Bank

Loan Amount: $250 million

GCFF Concessionality Amount: $25 million

The objective of this $250 million loan is to help Jordan confront severe strains in its electricity and water sectors, along with the two sectors’ mounting public debt, both problems brought on by the influx of Syrian refugees. The program provides direct budget support to ease the government’s debt servicing bill, and delivers technical assistance to support the government’s efforts to reform the energy and water sectors. The reforms aim to improve the financial viability and increase recent efficiency gains in these two key sectors. The program, which is being financed and executed by the World Bank and builds on an earlier Bank assistance program, is officially known as the Second Programmatic Energy and Water Sector Reforms Development Policy Loan.

Even before the start of the Syria conflict, Jordan was facing a steep increase in demand for public services and infrastructure, particularly electricity and water services, due to rapid population growth and urbanization. Service delivery in the two sectors has been further strained by the Syria crisis, especially in the northern governorates, which host the largest numbers of refugees. Since refugees began arriving, demand for water has increased by 21 percent throughout the country and by 40 percent in the north. Residential electricity consumption has grown by 26 percent.

The government began reforming the Water Authority of Jordan (WAJ) and the National Electric Power Company (NEPCO) before the Syria crisis. In the water sector, officials have made progress in increasing tariffs and implementing measures to improve operational efficiency and revenue collection as part of the government’s plan to achieve operational and maintenance cost recovery by 2021. In the energy sector, officials have been increasing the use of natural gas and renewable sources for electricity generation. However, the high investment costs needed to meet the increased demand in both water and energy, along with a drop in
budget support in 2015 and rising debt payments, have jeopardized the reform targets.

World Bank officials monitoring the loan program say it has already begun to have a positive impact on the government’s efforts to promote greater efficiency and cost recovery. For his part, Jordan’s Minister of Planning and International Cooperation, H.E. Imad Fakhoury, said the new loan would contribute to the government’s efforts to shore up the fiscal deficit for 2016 through 2018. He said this support “will help to significantly reduce the debt servicing bill, provide more time for debt repayments and, consequently, lessen dependence on local market borrowing at higher interest rates.”