Jordan lobbying for debt relief

The Jordan Times

By Tareq Ayyoub

23^rd October, 2001.

Jordan is lobbying major Western capitals to relieve some of its $7 billion foreign debt to sustain its economic growth, Finance Minister Michel Marto said on Tuesday.

Marto said that he met with members of the Paris Club of creditor nations to campaign for debt alleviation during a recent visit to Paris. However, he declined to give any details.

"It is up to them to decide the way they want to help Jordan, and we cannot dictate our terms," Marto told The Jordan Times.

The minister said the Paris Club is expected to meet in November where it will debate Jordan's request.

The effort came on the heels of an International Monetary Fund (IMF) recommendation to the Paris Club last month that commended Jordan's economic performance in line with restructuring efforts but called for adopting a "sizeable debt write-off," said one official who requested anonymity.

"Now we need the political backing of our major creditors in the Paris Club," he told The Jordan Times. In the past few weeks, His Majesty King Abdullah visited Washington, Moscow, Berlin, Rome, Paris and London, all of which have a major say in the Paris Club that is set to hold a meeting sometime in November.

And Prime Minister Ali Abul Ragheb is heading for Japan on Oct. 29 to explain Jordan's efforts to alleviate part of the debt.

Jordan's major creditors include Japan, France, Germany and Britain. Amman owes Japan alone around $1.25 billion and $500 million to France, according to officials.

Some economists, however, warn that Jordan's debt relief prospects could be eclipsed by the US-led effort to offer economic aid to Pakistan for the massive support it has offered to the anti-terror coalition.

Jordan last attempted to ease its debt burden in 1999, banking on the global sympathy it received following the death of His Majesty King Hussein. With backing from the G-7 summit of the world's richest and most industrialised countries, Jordan managed to reschedule $800 million in foreign debt.

"But that did not alleviate or ease our debt burden as the rescheduling is just a postponement of the debt repayment," Marto told the London-based Arabic daily Al Hayat in an interview published on Friday.

He also said that Britain wiped off JD42 million, and agreements were reached with Switzerland, Germany, France and Italy to swap debt with investments or development projects.

Despite the ongoing Palestinian Intifada and the continued showdown between Iraq and the US, Jordan says it has achieved up to 4.2 per cent economic growth.

However, the global economic slowdown following the Sept. 11 terror attacks on the US are expected to reduce expected growth in the last three months of 2001. Many economists say the attacks would cause a further decline in tourism revenues and expected investments.

Officials said the IMF, which together with the World Bank has been overseeing Jordan's economic reform plan for over 10 years, praised Jordan's economic growth achievements, including building up foreign reserves, maintaining a stable exchange rate and reducing the budget deficit.

In addition, it also praised Jordan's new legislative reforms to open up the market and encourage investments, all of which led to Jordan's accession to the World Trade Organisation and the ratification of a free trade agreement with the United States last month.

"Looking at the political, geographic and economic position of Jordan and in light of the Sept. 11 attacks which put Jordan's economy in a weaker position, the IMF agreed that Jordan is a special case and therefore adopted a recommendation for a sizeable debt write off," said one official source.

Economists say that if Jordan wins a 50 per cent write off on its government-to-government debt, this could enable the country to spend between $300 million to $400 million extra on development projects and on upgrading its security and intelligence capabilities, a major pillar in the global fight against terror.

Jordan currently pays around $800 million a year on servicing its foreign debt, including instalments and interest payments.