Exceptional events push public debt above legal limit in Jordan
Jordan will pay around JD500 million this year in interest payments on the Kingdoms growing public debt, according to Finance Minister Mohammad Abu Hammour. The bill of interest payments represents around 50 percent of the budget deficit, which is forecast for this year to reach JD1.16 billion, he added, stating that 2011 was an exceptionally difficult year for the Kingdom in terms of the soaring debt level.
The official made the remarks Tuesday after he signed a debt swap agreement with Germany worth 27 million euros, which brought up the value of debts cancelled by the EU country to 261 million euros Irregular supply of natural gas from Egypt, due to several sabotage attacks on the pipeline in Sinai this year, has cost the country over JD840 million as electricity generation plants resorted to heavy fuel, he indicated.
Noting that the public debt has recently exceeded the legal limit of 60 percent of the gross domestic product to reach 65 percent of the GDP due to the exceptional circumstances related to energy supply difficulties, Abu Hammour stressed that the government will work on bringing public debt down to safe levels. The minister indicated that the government may issue bonds next year on international markets seeking cheaper borrowing tools.
In November last year, Jordan issued five-year bonds worth $750 million on international markets that were sold to about 220 international investors at a fixed annual interest rate of 3.875 percent. Asked about the financial aid decided by the Group of Eight (G-8) and international lenders early this week to Jordan and other Arab nations - Egypt, Tunisia and Morocco - in recognition of democratic reforms, he reiterated that the assistance will be in the form of concessional loans to finance development schemes. He explained that in a bid to avoid increasing public debt levels, Jordan and the group of lenders will look into mechanisms to finance development projects in the country without the need for government guarantees. On Saturday, the tenth of September, the G-8 and other international and regional lenders decided to increase the volume of financial aid promised to Egypt and Tunisia as part of the Deauville Partnership initiated by the group on May 27 from $20 billion to $38 billion as it included Jordan and Morocco in recognition of their democratic reforms. Abu Hammour attended the meeting, which took place in Marseille, France.