Loan instalment postponement championed by commercial sector draws concern from economist

AMMAN — Commercial sector representatives are urging the government to postpone loan instalments for the month of April, and to pay April salaries by the 20th of the month to boost Jordanians’ purchasing power.

President of the Jordan Association for Restaurants and Sweet shops Owners, Omar Awwad, told The Jordan Times that this Ramadan, restaurant footfall dropped by 40-50 per cent in comparison with last Ramadan. 

Meanwhile, representative of the clothing, footwear and jewellery sector at the Jordan Chamber of Commerce (JCC), Asad Qawasmi, said that demand in the apparel sector remains “modest”.

Both Qawasmi and Awwad attributed the drop in demand to low purchasing power and limited cash circulation in the market. 

“We demand the government pay April’s salaries by the 19th or 20th of April to provide Jordanians with some cash to buy new outfits and home accessories for Eid Al Fitr,” Qawasmi told The Jordan Times. 

Postponing loan payments will also increase purchasing power, Qawasmi added. However, the payment postponements should be interest free for debtors to be effective, he said. 

Demand during the Easter holiday has not increased sales volume for the clothes, jewellery and footwear, Qawasmi noted. 

Additionally, fluctuating weather conditions have not helped the clothing market, he added. 

“Eid Al Fitr coincides with the beginning of the summer season. We are very optimistic that the clothing sector will be revived by the end of next week,” Qawasmi added. 

Awwad stated that postponing loan instalments will contribute to increasing the liquidity and purchasing power of Jordanians in light of the recession many markets are witnessing.

“Demand is mainly observed for suhoor food products, not iftar,” Awwad added. 

Suhoor is the meal consumed by fasting Muslims early in the morning, before Fajr, or the dawn prayer. 

Awwad attributed the increase in demand for suhoor food items to the lower cost of Suhoor relative to iftar. 

Economist Hossam Ayesh warned that postponing loan instalments is a quick solution to an immediate problem, but its future effects will be severe.

“Delaying instalments means that the borrower will be burdened with new interest on this debt,” Ayesh told The Jordan Times. 

Ayesh noted that postponing instalments is a dangerous tool, and its consequences are additional years or additional costs at a later time. 

“What is postponed becomes a new part of the loan, with new interest imposed on it,” Ayesh said.