Ammon News - AMMONNEWS - Jordan, the Middle East’s smallest economy after Bahrain, plans to raise as much as US$564 million (RM2 billion) from a debut Islamic bond sale next month as it seeks to narrow the budget deficit.

The central bank expects to sell sukuk valued between 300 million dinars (RM1.5 billion) and 400 million dinars (RM2 billion) on behalf of the Jordanian government, Deputy Governor Adel Al-Sharkas said yesterday. The government is aiming to attract the 1.4 billion dinars of excess liquidity held by the nation’s four Islamic banks, he said.

“Since we have excess liquidity from our Islamic banks, we’d rather use excess liquidity in Jordan and issue in dinars,” Al-Sharkas said by telephone from Amman. “The Islamic banks will buy the sukuk.”

Jordan, which imports almost all its energy needs, estimates its budget deficit will narrow 24 per cent to 688 million dinars this year. The country, whose debt is rated by Standard & Poor’s at BB-, a junk level three steps below investment grade, is probably selling local debt because it would pay too much for an international offering, according to Quantum Investment Bank Ltd.

“To come to the market with this rating will be expensive, far from highly rated countries like the UK and Luxembourg,” Montasser Khelifi, a Dubai-based senior manager at Quantum, said yesterday. “They would have huge margins.”

Foreign aid

The kingdom has about US$6 billion of debt coming due this year, according to data compiled by Bloomberg.

“The government is looking for creative means and ways to finance itself,” Yusuf Mansur, Amman-based economist at Envision Consulting Group, said by phone on yesterday, noting the country’s budget deficit decreased in 2015 owing to an increase in foreign aid.

With a local debt sale, the kingdom doesn’t “have to go under the scrutiny of the World Bank and the International Monetary Fund”.

The US last month pledged to boost its annual aid to Jordan to US$1 billion for the next three years from US$660 million, subject to congressional approval.

*Bloomberg