JORDAN: FS STRAW LETTER TO G7 ON JORDAN DEBT

C O N F I D E N T I A L AMMAN 003640

SIPDIS

TREASURY FOR A/S QUARLES, DAS RADELET, MICHAEL KAPLAN
DEPT FOR E, NEA, EB
NSC FOR CLAY LOWERY

E.O. 12958: DECL: 07/03/2012
TAGS: EFIN JO
SUBJECT: JORDAN: FS STRAW LETTER TO G7 ON JORDAN DEBT

REF: AMMAN 03617 AND PREVIOUS

Classified By: DCM Greg Berry, reasons 1.5(b,d)


1. (c) As reported reftel, the following is the text of the
UK Foreign Secretary's June 14, 2002 letter to G7 colleagues.
This text was provided to us on July 3.


2. (c) Begin text:
&I am writing to ask for your continuing support for Jordan
their discussions with the IMF and Paris Club Creditors. Now
is an important time for us all to demonstrate our support
for a key ally in the coalition against terrorism and a force
for stability in an unstable region.

Jordan,s economic performance remains blighted, and social
problems exacerbated, but regional tensions which impede its
trade with the West Bank and Israel on the one hand and Iraq
on the other. Recent events in the West Bank have not made
things any easier.

In these difficult circumstances I believe King Abdullah is
continuing to show strong economic leadership. His Plan for
Social and Economic Transformation, announced last autumn, is
a serious attempt to push forward with structural reforms )
building on Jordan,s already good record ) while finding
some new resources to ease social problems. It is clear that
the Plan is not going to be allowed to compromise sound
macroeconomic management: spending this year is being
tailored to available resources while the authorities have
announced new, politically sensitive, revenue raising
measures. I was struck by the warmth of the endorsement of
Jordan,s policies given in discussion in the latest IMF
report.

Jordan,s good economic management will produce its own
reward in the form of strong performance once normal
relations with its neighbours are possible. But in the
meantime Jordan is labouring under difficulties which are not
of its own making and I believe the King deserves our
support. As you know, discussions between the IMF and the
Jordanian authorities on a new programme are advancing.
Policy measures in the programme are likely to be consistent
with the King,s Plan for Social and Economic Transformation,
while extra resources from the Fund may have a role to play
in allowing the Plan to go ahead, and social issues to be
addressed, more rapidly. This will be particularly important
in the forthcoming election year. If the IMF Staff make a
good case for further IMF lending we will be favourably
disposed to support; I hope you will also.

If a new IMF programme is agreed Jordan may well seek a
further rescheduling from the Paris Club. If so, I believe
creditors can and should help. The British Government is
willing to press for the most generous possible rescheduling.
We would hope that this would be the last time Jordan would
need to come to the Paris Club. We have an open mind on how
this exit from the rescheduling cycle might be achieved, but
for instance if Jordan, supported by the IMF, judged that a
full stock rescheduling was in its long term interests we
would be supportive. Furthermore the UK has already been
actively promoting conversion to equity of official Jordanian
debt to the UK, within existing Paris Club rules; we would
not only encourage others to do the same but would support
any Jordanian request to raise the current threshold.

I would welcome your views on this matter and how we can take
it forward well in advance of any discussions in the Paris
Club.

I am copying this letter to G7 colleagues8.
Gnehm