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CBJ adjusts interest rates as needed to protect national economy — governor

More than $850m issued to banks, financial institutions via soft loans, credit programmes since 2012

By JT - Apr 22,2019 - Last updated at Apr 22,2019

Central Bank of Jordan Governor Ziad Fariz (left) addresses recent interest rate increases during a meeting on Monday (Petra photo)

AMMAN — The Central Bank of Jordan (CBJ) adjusted the interest rate as needed to protect the national economy from the challenges resulting from unstable regional conditions, CBJ Governor Ziad Fariz said on Monday.

The CBJ is looking to establish other instruments to lower costs and maintain monetary and financial stability, he noted, as reported by the Jordan News Agency, Petra.

When adjusting the interest rate, the CBJ takes into consideration a wide array of accurate and independent scientific data, facts and analysis, Fariz underlined.

He added that national economy indicators are also factored into the CBJ’s decisions, along with regional and international economic indicators.

Since 2012, the CBJ has been going forward with the refinance programme aimed at facilitating soft loans to banks at low and fixed interest rates, Fariz underlined.

The aim of issuing these loans is to lower the costs of facilitating credit in the governorates and areas outside Amman, with a repayment period that can reach 15 years, he explained.

Fariz said that the finance volume available under this programme stands at some JD1.2 billion, where more than JD600 million of which has been granted to the targeted sectors of industry, tourism, renewable energy, agriculture, ICT, engineering consultation, health, transport and education.

He added that the CBJ also provided licensed banks operating in Jordan with a $440 million credit line to reissue in loans for SMEs, in cooperation with regional and international institutions.

Since then, $252 million has been facilitated to these banks and financial institutions, the governor reaffirmed.

Overall, the credit and loans facilitated by the two programmes have contributed to providing some 14,000 jobs so far, he said.

Those programmes have helped maintain the interest rate offering within appropriate “limits”, Fariz stated.

The CBJ currently enjoys a high level of foreign reserves that exceeds $13 billion, which is enough to cover the Kingdom’s imports of goods and services for 7.2 months and is double the internationally accredited requirement of three months, he pointed out.

Public expenditure is declining to 17.1 per cent of the average GDP of the years 2009-2018, down from 21.8 per cent during the 2000-2008 period, he said, adding that this downtrend is not a negative indicator, where the private sector has to play its role.

Notably, the contribution of national exports to the GDP dropped from 25 per cent to 19.4 per cent in the past years, due to the border closures, Fariz elaborated.

The closures, he followed up, in part closed Jordan off from important export destinations, such as Iraq, Syria, Turkey and the EU.

CBJ studies indicate that these last eight years have lost Jordan an equivalent of some 20 per cent of its GDP in export opportunities, he highlighted.

All sectors were affected, Fariz noted.

There is a dire need to revisit the Kingdom’s free trade agreements with several countries, he said, according to Petra.

The CBJ estimated the value of customs exemptions granted to Turkey alone at some JD322 million for the years 2011-2017 period, Fariz said.

The governor added that national exports to the EU countries remain unchanged for years and do not exceed 3 per cent of the Kingdom’s national exports, despite the simplified rules of origin agreement.

For his part, Jordanian Businessmen Association President Hamdi Tabbaa stressed that having a developed and competent financial system is integral to improving and stimulating the economic growth.

The Kingdom enjoys a well-structured banking system that can absorb shocks due to the fact that banks have high levels of capital adequacy, he concluded.

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