x Abu Dhabi, UAESunday 22 October 2017

Jordan mulls issuing bonds to cover budget shortfall

Syrian refugees putting strain on country's finances

Al Zaatari Camp in Jordan is home to 80,000 people. Jordan's economy has been severely hit by the flow of refugees arriving from Syria since 2011. Ammar Awad / Reuters
Al Zaatari Camp in Jordan is home to 80,000 people. Jordan's economy has been severely hit by the flow of refugees arriving from Syria since 2011. Ammar Awad / Reuters

The government of Jordan has asked banks to submit proposals to arrange a US dollar conventional or Islamic bond issue, sources familiar with the matter said yesterday.

The bond would be of benchmark size, said one of the sources, declining to be named because the information is private. Benchmark-sized bonds are generally upwards of US$500 million.

Jordan issued its first domestic sukuk last year, but should it opt for an Islamic bond, the planned debt sale would be the first international sukuk ever issued by the country.

Jordan's ministry of finance did not immediately respond to a request for comment.

Jordan raised $500m in April through a tap of its existing $500m bond issued in November 2015 and maturing in 2026. Under a bond tap, an existing transaction is reopened for subscription, using the same documentation as before.

It also issued last October a $1 billion bond maturing in January 2027, with Citi and JPMorgan leading the transaction.

Jordan's economy has been severely hit by the flow of refugees arriving from Syria since 2011. "Providing for the needs of the Syrian refugees in Jordan has materially impacted Jordan’s public finances and will continue to do so," said Jordan's latest bond prospectus, dated April 2017.

"If the Kingdom does not receive additional and sufficient assistance from the international community(...)the presence of large numbers of Syrian refugees in Jordan will continue to materially strain the general resources of the Government and negatively affect the Kingdom’s economy."

Jordan, rated B1 by Moody's and BB-minus by Standard & Poor's, is receiving support from the International Monetary Fund through a three-year, $723m extended fund facility, which was approved in August last year.

It also relies on funds from the World Bank and other international organisations. Before the issue of $500m in bonds in November 2015 as a standalone credit, Jordan issued bonds fully guaranteed by the US government through the US Agency for International Development (USAID).

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