AMMAN —
Standard & Poor’s (S&P) credit rating for Jordan stands at B+ with
stable outlook, despite a global uncertainty caused by Russia’s war on Ukraine,
which sent jitters across the world, sending the prices of fuel derivatives
through the ceiling and casting doubt of the availability of certain food
products as early as this year.
اضافة اعلان
The Kingdom received a B+ in the Global Sovereign
Ratings Outlook 2022 issued by S&P in April 2022, which is bound to impact the
future of loans and investments the country seeks to obtain.
The S&P report assesses the sovereign credit
risks of countries to determine their ability to cover their
financial obligations. A country’s credit rating determines its ability to access funds
both internationally and domestically, and the credit rating affects the cost
of any country’s borrowing.
The B+ credit rating reflects the “noticeably
variable” rank.
S&P sovereign credit analysis is based on five
pillars: institutional assessment, economic evaluation, external evaluation,
financial evaluation, and monetary evaluation.
These are measured using several indicators: the per
capita growth of GPD, investment growth, unemployment rate, inflation, budget
deficit-to-GDP ratio, state revenue, short-term public debt to GDP, foreign
currency debt to GDP, and many more.
The key takeaways from the report are that the
COVID-19 pandemic continues to pose a major risk to sovereign ratings;
governments’ capacity to implement revenue and spending rebalancing measures is
limited by fragile social context and political polarization; rising global
interest rates will pose an additional challenge to emerging markets primarily
dependent on external funding, like Jordan.
Jordan issued $650 million worth of Eurobonds in the
global financial markets on June 8.
The Central Bank of Jordan’s governor said
that the high demand for the issuance of said bonds reflects the confidence of
global investors in Jordan’s financial and monetary policies.
However, according to political economy specialist
Zayyan Al-Zawaneh, “the S&P report unveiled and exposed Jordan’s economic
truth to the world, when it called Jordan’s ratio of public debt to GDP a high
risk.”
He said that Jordan is in a tight debt trap that is
impossible to fix at the moment and that “would drive away from Jordan any sane
investor”.
He said that “Jordanian officials consider the
Eurobond loan an excellent achievement, when in fact, the country has to pay an
extremely high interest rate, that stands at 7.75 percent, which means that the
international market is aware of how risky Jordan’s situation is, and in the
future, any loan will either come with a high-interest rate or a decreased
amount.”
State loans, he said, are made for political
reasons, while international market loans are purely for financial gains.
Economic analyst
Mazen Irsheid told
Jordan News that the rating that Jordan received in the S&Ps report is not surprising,
since Jordan’s debt is increasing.
“The report shows how the country’s economy is encumbered
by debt,” he said.
Irsheid noted that “Jordan pays its debts by
borrowing another loan”.
“It does not pay its debt using its revenues, it is
only paying the interest on the loan with its revenues,” he said.
Irsheid forecasts that Jordan’s rating will be lower
and weaker in the coming years, “since the Kingdom could be knocked out by an
inflationary recession, there are hikes in interest rates, and the economy is
in recession, in addition to the
Russian-Ukraine war”.
“The situation is not hopeful,” he said, stressing
that while it is not promising for the global markets in general, “we feel it
more in Jordan because Jordan imports most of its needs, paying high
international prices”.
Economic writer
Salameh Darawi told
Jordan News that the high-risk rating is due to the
decline in economic growth, “besides the internal, regional, and international
repercussions on the national economy”.
Added to that is the “decrease in the refugee
support provided to Jordan and the urgent expenses that the government had to
pay, like during the pandemic”, he added.
While Jordan “has a good relationship with lenders
and the donor community, the lack of an economic plan could increase the level
of risk” when a lender wants to lend money to the Kingdom, which will likely
result in high-interest rates or in the country to “be lent a smaller amount
than it requests”.
Jordan’s economic situation and S&P rating may
place it in a better position than that of neighboring and regional countries,
Jordan still “has many challenges”, Darawi said.
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