Jordan, US sign $1.25 billion loan guarantee agreement

AMMAN — Jordan and the US on Monday signed the second sovereign loan guarantee agreement, which will allow Jordan to access affordable financing from international capital markets.

The Jordan News Agency, Petra, reported that the $1.25 billion agreement was signed by Finance Minister Umayya Toukan and Beth Paige, USAID mission director to Jordan. Prime Minister Abdullah Ensour and US Ambassador in Amman Stuart Jones signed the declaration related to the deal.

In a statement, the US embassy said that the agreement ensures that Jordan can continue to “provide critical services to its citizens as it enacts transformative economic reforms and hosts 600,000 refugees who have fled the violence inside Syria”. 

“The signing of this loan guarantee agreement fulfils the commitment made by President [Barack] Obama during his meeting with King Abdullah in California on February 14, 2014. At that meeting President Obama noted that, ‘we have very few friends, partners and allies around the world that have been as steadfast and reliable as His Majesty King Abdullah, as well as the people of Jordan’.”

Pursuant to the loan guarantee agreement, the United States would guarantee repayment of principal and interest on the issuance of up to a $1 billion, five-year Jordanian sovereign bond. This follows the US guarantee for a $1.25 billion issuance last year. 

The embassy said last year’s guarantee was “very successful in reducing Jordan’s borrowing costs and supporting its reform efforts during a time of regional instability”.

The difference in the interest rate on the borrowing would save Jordan $200 million, according to Petra, which said that the previous issuance saved the Treasury $300 million, as the country is able to borrow at 2.5 per cent interest rate, the same rate paid by the US government for external loans. 

In his remarks at the ceremony, Ensour voiced appreciation for the US administration’s support, which, he said, would boost Jordan’s reform drive and empower it to maintain “growth momentum”. In addition, he said, the agreement would also help Jordan continue its humanitarian support for the Syrian refugees. 

He also thanked Washington for allocating $270 million in additional assistance to Jordan this year.

Toukan announced that the bond issuance is slated for June 23 in New York, to be managed by Citibank and J.P. Morgan. 

The minister noted that Jordan’s indebtedness stands at around JD21 billion, constituting more than 82 per cent of the GDP.

Paige said that the loan guarantee agreement signals that Washington has great confidence in Jordan’s economic reform to guarantee a loan of this size.