Banks required to ease credit — CBJ governor

AMMAN — The Central Bank of Jordan (CBJ) lowered its basic interest rates twice in 2013 and 2014 with a total of 125 points, yet banks’ response to these procedures was not as expected in terms of credit facilities, CBJ Governor Ziad Fariz said. 

Such a response made CBJ develop its tools in a way that helps banks enhance their abilities to maintain their liquidities to meet their operational requirements and respond to the growing funding needs of different economic sectors, Fariz said at a meeting with banks’ chairmen of boards of directors, according to the Jordan News Agency, Petra, on Saturday.

The new framework of the monetary policy gives CBJ enough flexibility to manage its tools in a way that achieves its goals of maintaining monetary stability, the governor told the bankers.

The monetary policy included a new interest rate to be accredited as the reference point for administrating the policy, which was called “CBJ main interest rate” and stands at 2.75 per cent, Fariz said, noting it will be used to set interest rates for other monetary policies.

He also noted that the recent CBJ decision to lower the interest rate by 0.25 per cent was based on positive and ongoing developments the national economy has achieved, such as maintaining good levels of foreign currency reserves.

Fariz also expected the deficit in current accounts to decrease, along with a continuing decline in inflation rates, which, he said, would provide a good environment for the economy to develop until it achieves the desired and sustainable growth rates.

The governor also noted that CBJ will continue monitoring and following up on all economic developments the national economy goes through at both internal and external levels.

The monetary policy during the past few years has paid off in terms of ensuring monetary stability, Fariz said, noting that CBJ has revisited and adjusted the operational framework of this policy through a two-phase plan.

The first phase, applied in 2012, aimed to create tools to pump liquidity into the economy so that it would be able to cope with the pressures Jordan faced as a result of the influx of a huge number of Syrian refugees and the increase in the imports bill, he said.

Other factors included the wide deficit in the general budget and current account, and the shortage in liquidity to finance economic activity, he said, adding that JD2.4 billion was pumped into the market for funding purposes.

In the second phase, which recently started, monetary stability continued to be the main goal and plans focused on helping banks to better utilise available funds to stimulate economic activity, the official noted.

Fariz said that the banking sector’s performance was “good” in 2014, despite the prevailing conditions in the region, noting that assets in the sector grew by 4.9 per cent reaching JD44.4 billion.

Credit extended by banks also went up by 5 per cent to JD19.2 billion, while non-performing loans, compared to the total loans, went down to 6.2 per cent compared to 7 per cent in 2013, the governor announced.

Customer deposits increased by 9.7 per cent reaching JD30.3 billion, JD6.2 billion of which is in the form of foreign currencies, according to Fariz.

The general budget’s deficit dropped to 3.5 per cent in 2014, compared to the national domestic product, while in 2012 it stood at 8.3 per cent, Fariz said, adding that the National Electric Power Company’s losses went down by nearly 50 per cent. 

Current account deficit has improved as a result of increasing tourist income and expatriate remittances, in addition to increasing foreign investment inflows, which contributed to the foreign reserves to reach comfortable levels that cover the Kingdom’s imports of goods and services for seven months.

In this regard, Fariz expected that the government would design a new national economic reform programme in cooperation with the International Monetary Fund.