Jordan to sell Eurobonds

Amman last year got only half of the 1. 3b dinars in foreign grants

Jordan will tap the bond market for the first time in more than two years as the nation struggles with a cut in foreign aid, a rising energy bill and an influx of Syrian refugees.

Jordan is preparing to sell Eurobonds early this year, Jordan’s Prime Minister Abdullah Ensour said in a January 16 interview without providing further details.

The yield on the 3.875 per cent notes due November 2015 fell to 4.77 per cent yesterday from 5.77 per cent a year ago, according to data compiled by Bloomberg.

“The country has been hit by external factors ranging from political tension, rise in energy prices and global economic slowdown,” said Tareq Qaqish, deputy head of asset management at Al Mal Capital in Dubai. “A big factor would be the confidence of investors that the government is taking the right measures to narrow the deficits.”

Jordan, the second- smallest economy in the Middle East after Bahrain, imports more than 90 per cent of its oil and relies on foreign investment and grants to support public finances. The government removed fuel subsidies in November as part of a $ 2 billion credit facility agreed with the International Monetary Fund in July. The resulting protests have largely subsided.

The premium investors demand to hold Jordan’s dollardenominated debt over US Treasuries rose 18 basis points, or 0.18 per centage point, to 417 in the week ended Jan. 18, according to JPMorgan Chase & Co.’ s EMBIG Jordan Sovereign Spread index. That was the biggest weekly advance

❝ The country has been hit by external factors ranging from political tension, rise in energy prices and global economic slowdown.”

Tareq Qaqish Deputy head of asset management

in seven, and compared with a four basis- point decline in Lebanon’s sovereign spread to 383. The premium was at 414 basis points on Friday.

Major concern

Still, “the sharp decline in foreign donor support is a substantial concern for Jordan,” said Robert Powell, a Middle East and North Africa analyst at the Economist Intelligence Unit. “Without foreign grants, we estimate that the deficit would balloon to over 9 per cent of gross domestic product.”

Jordan’s 2013 budget foresees a deficit of 5.4 per cent of GDP, the official Petra news agency reported on January 1. The last time government spent less than it earned was in 2004, according to IMF data. Jordan’s gross debt increased to 79 per cent of GDP in 2012, the fourth consecutive year the rate rose, the data show.

Jordan last year got only half of the 1.3 billion dinars ($ 1.83 billion) in foreign grants it received in 2011, placing “pressure on the budget and some pressure on the domestic market,” Central Bank Governor Ziad Fariz in a Jan. 16 interview. The kingdom received less than half the 250 million cubic feet of cheap gas agreed upon with Egypt last year, forcing it to buy moreexpensive fuel elsewhere.