Identifier
Created
Classification
Origin
02AMMAN2475
2002-05-19 09:40:00
CONFIDENTIAL
Embassy Amman
Cable title:  

IMF MISSION VIEWS ON JORDAN DEBT

Tags:  EFIN JO 
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C O N F I D E N T I A L AMMAN 002475 

SIPDIS

S/ES-O FOR UNDER SECRETARY LARSON OOB 5/20
TREASURY FOR UNDER SECRETARY TAYLOR AND MICHAEL KAPLAN
NSC FOR GARY EDSON/CLAY LOWERY

E.O. 12958: DECL: 05/20/2007
TAGS: EFIN JO
SUBJECT: IMF MISSION VIEWS ON JORDAN DEBT


C O N F I D E N T I A L AMMAN 002475

SIPDIS

S/ES-O FOR UNDER SECRETARY LARSON OOB 5/20
TREASURY FOR UNDER SECRETARY TAYLOR AND MICHAEL KAPLAN
NSC FOR GARY EDSON/CLAY LOWERY

E.O. 12958: DECL: 05/20/2007
TAGS: EFIN JO
SUBJECT: IMF MISSION VIEWS ON JORDAN DEBT



1. (c) Summary. IMF staff currently in Amman says that
Jordan needs a new Fund program that will allow it to
"refinace" its Paris Club debt in such a way as to guarantee
its graduation from the IMF process. Given its low credit
rating and volatile neighborhood, Jordan does not have
market-based alternatives. Being by far the largest
creditor, Japanese support for such a refinancing is
critical. The IMF's points will be spelled out in staff
papers to be issued following the May 23 end of its current
mission to Amman. End summary.


2. (c) According to Ihsan Mansur, the leader of the IMF
mission that is currently in Amman to negotiate a new IMF
program, the IMF's timeline remains to have a new 2-year,
$105 million (SDR 85 million) stand-by program approved by
the IMF in July, followed immediately thereafter by a Paris
Club negotiation. Mansur said the mission should wrap-up on
May 22 or 23 with a press conference. The new director of
the IMF's Middle East department, George Abed, would fly in
to seal the deal on the new program and deal with the press.


3. (c) Mansur said that this agreement would mark Jordan's
"graduation" from the IMF. Thus, Mansur stressed to Econ
chief, Jordan needs a Paris Club agreement that will allow it
to "refinance" its external debt in such a way that it will
never need to return to the Paris Club (i.e. the
"reprofiling" the Jordanians are seeking). He said that if
Jordan does not obtain this refinancing, it will have to
borrow from the market at high interest rates. This, plus
short market maturities, would leave Jordan financially
vulnerable to external events and periodic rollover crises.
These could be associated with political uncertainties in
Jordan's volatile "neighborhood." All this, Mansur said,
increases the likelihood of a future debt or payments crisis
absent a refinancing (he cited Turkey and Lebanon as negative
examples).


4. (c) Mansur also stressed the importance of Japan's
support for such an approach, since it is by far the largest
creditor and has the highest interest rates on its debt
(relative to market rates). They stressed that even if it is
willing to follow such an approach on its own debt, Japan
needs the multilateral cover of the Paris Club to take
action. A member of the IMF mission with experience in Japan
described how it would create domestic political problems for
the Japanese to be seen as acting alone.


5. (c) Comment: Mansur said that the IMF's financial
points would be spelled out in the staff papers that would be
distributed following the visit, but that it was up to
creditors to find the most appropriate mechanisms to meet
Jordan's needs. Jordan's limited access to market finance
was highlighted by Standard and Poor's April 30 decision to
remove its "positive" outlook on Jordan's "BB-" credit
rating. Recognizing Jordan's success in implementing
economic reforms, S and P cited the uncertain regional
situation as the main factor in its decision. The rating is
now exactly at the same level as it was at the beginning of
Jordan's current IMF program, before it joined the WTO and
negotiated an FTA with the United States. This suggests that
Jordan does not yet have a meaningful, affordable alternative
to the Paris Club for dealing with its medium-long term debt
exposure.
Gnehm