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Jordan plans to raise as much as $2bn in bonds backed by the US government this year as the Arab country seeks to shore up public finances amid an increasing influx of refugees from war-ravaged Syria.
The kingdom is working with a syndicate of banks and aims to access the market before the end of the year, Finance Minister Umayya Toukan said on Saturday, declining to identify the banks. The US guarantee has helped Jordan’s $750mn Eurobonds due 2015 rally to a record this month, according to data compiled by Bloomberg.
“That’s the least expensive source of financing the budget deficit,” Toukan, who was appointed to his current post March 30, said in an interview at the World Economic Forum in Jordan. The issuance will be $1.5bn to $2bn, he said.
The Jordanian economy, the smallest in the Middle East after Bahrain, has been hurt by rising energy costs after disruptions of gas supplies from Egypt and the burden of hosting more than 500,000 Syrian refugees. The budget deficit may widen to 9% of economic output this year, the highest level since at least 2008, according to International Monetary Fund estimates.
Disruptions in supplies of natural gas from Egypt in 2011 and 2012 cost the nation $5bn because it had to buy more expensive fuel elsewhere, King Abdullah II said in December. The crisis prompted Jordan, which imports more than 90% of its energy supplies, to sign a $2bn loan agreement with the IMF. Under the programme, Jordan has reduced energy subsidies, replacing them with cash transfers.
The IMF accord has a “clear road map on reducing the budget deficit over three years as well as the debt levels,” said Toukan, who served as the country’s central bank governor from 2001 to 2010. The government seeks to reduce the budget shortfall by “at least” one percentage point of gross domestic product this year to just over 8%, he said.