ECONOMY

Moody’s downgrades Jordan on debt fears

The credit ratings agency, Moody’s, downgraded its sovereign grade for Jordan amidst spiraling government debt. (File photo: Reuters)

Ratings agency Moody’s cuts its sovereign grade for Jordan by two notches Wednesday, saying government finances had weakened sharply in the past two years.

The rating fell to B1 from Ba2, in the middle of its category for “speculative” or so-called junk debt.

Moody’s noted that higher fiscal deficits had sent government debt soaring by nearly 10 percentage points to GDP between 2011 and 2012, and said the debt burden was likely to reach almost 90 percent of GDP in 2014, compared to just 60 percent five years ago.

It also said the country’s foreign exchange reserves had plummeted, in part from use to defend the Jordanian dinar’s official peg to the US dollar amid a growing flight by Jordanians to dollar deposits.

Inflows of official support have helped since the beginning of 2013, but reserves remain weak, Moody’s said.

In April the International Monetary Fund released $385 million to the country, part of a $2.1 billion loan to help it weather regional instability, including an influx of Syrian refugees.

Still, Moody’s said the country’s external vulnerability rating is more than twice as high as other countries with “B” credit grades.

The new rating came with a stable outlook, which Moody’s said reflects its view “that the government will pursue fiscal consolidation that should stabilize the high debt numbers in the medium term.”

However, it warned, “the failure to reduce the deficit significantly from current levels could lead to further negative rating actions.”

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Last Update: Thursday, 27 June 2013 KSA 08:55 - GMT 05:55
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