TREASURY DEPUTY SECRETARY KIMMITT APPLAUDS GOJ

C O N F I D E N T I A L SECTION 01 OF 02 AMMAN 004820

SIPDIS

SIPDIS

FOR NEA/ELA, NEA/I, AND EEB

E.O. 12958: DECL: 12/04/2017
TAGS: ECON EFIN EAID JO IZ
SUBJECT: TREASURY DEPUTY SECRETARY KIMMITT APPLAUDS GOJ
FINANCIAL REFORMS; ENCOURAGES DEBT RELIEF FOR IRAQ

REF: AMMAN 4758

AMMAN 00004820 001.2 OF 002


Classified By: Ambassador David Hale for reasons 1.4(b) and (d)


1. (C) SUMMARY: During a December 5 visit to Jordan,
Treasury Deputy Secretary Kimmitt emphasized that Jordan's
economic reform program made it possible for the U.S. to
support the GOJ proposal to the Paris Club to buy back some
of its debt. He encouraged continued reforms, especially
elimination of the subsidy programs. The GoJ officials whom
he met confirmed that subsidies were not part of the 2008
budget, and would be replaced by a cash transfer program to
Jordan's neediest citizens. Kimmitt also encouraged Jordan
to assist Iraq in resolving its debt issues. Jordanian
Finance Minister Kasasbeh reported a binational committee had
been established to resolve Iraqi debt to Jordan, and Chief
of the Royal Court Awadallah said the GOJ was willing to
consider investments, oil, export agreements, and other
avenues to retire the debt as long as there was no negative
impact on the GoJ treasury. Kimmitt also stressed the
importance of a strong anti-money laundering regime, praised
GoJ passage of an AML law, and offered continued U.S.
technical assistance. END SUMMARY.

Jordan's Model Economic Reform Plan
--------------


2. (C) During a December 5 courtesy call on new Finance
Minister Hamad Kasasbeh, Treasury Deputy Secretary Robert
Kimmitt emphasized the strong, historic bonds between the
United States and Jordan, commenting that these ties have
facilitated cooperation on political, economic, and regional
issues. This foundation, along with Jordan's commitment to
reform, had made it possible for the U.S. to support Jordan's
Paris Club proposal to buy back its debt, and would hopefully
encourage Congress to take the steps necessary for the U.S.
to participate in the buyback operation. He noted it was
important that the GoJ had decided to use ESF for the
buyback, and was also preparing to implement other economic
reform measures including the elimination of subsidy
programs. Kasasbeh, who led the GoJ delegation to the Paris
Club, was appreciative of U.S. support, and commented that
the buyback would not have been possible without the U.S. He
said the U.S. position was key to the participation of
France, Canada, and the United Kingdom, and that Japan had
also been swayed and recently informed the GOJ it would seek
other means of compensation since it could not legally
participate in the buyback.


3. (SBU) Kasasbeh explained the buyback operation would
enable Jordan to pursue long overdue reforms such as
liberalization of the fuel sector and elimination of the
barley subsidy, and to launch programs to assist Jordan's
neediest citizens. These measures were necessary to further
lower the current public debt ratio of 69 percent, but in
order for them to be successful, a public information
campaign was needed. He said the GoJ had begun the process
by introducing to parliament a new public debt law with a
much lower ceiling, and by making an effort to explain
prevailing economic conditions and the law's provisions to
the MPs. Kimmitt noted that such an effort to reduce public
debt was good news and urged the GoJ to get that news to the
American Congress, so that they were aware of the
government,s efforts.


4. (C) In a separate meeting with Kimmitt on the same day,
Chief of the Royal Court Bassem Awadallah said the subsidies
-- an annual expense of $1.2 billion -- represented one-fifth
of the budget, and their continuation would be "suicide."
The GoJ would initiate a cash transfer program to help the
poor, but it also needed to increase public sector wages.
Awadallah said the new cabinet was committed to reform, but
rising inflation would make some changes difficult. He was
also concerned about the peg of the Jordan Dinar to the
dollar, noting that the dollar's drop made it difficult to
use monetary tools to fight inflation. Nevertheless, Jordan
had no plans to remove the dollar peg, and Awadallah
commented that the drop was helping Jordanian exports and
tourism. Awadallah added that he had traveled to Saudi
Arabia and the United Arab Emirates to solicit grants, and
the UAE had proposed a debt-equity swap program, a concept
worth considering because it would create much needed jobs in
Jordan. He was also planning a trip to Kuwait.

Iraqi Debt
--------------


5. (C) Kimmitt congratulated both Kasasbeh and Awadallah on
Jordan's efforts to manage its debt, and encouraged Jordan to

AMMAN 00004820 002 OF 002


be creative and generous in its treatment of Iraqi debt,
remarking that on his recent visit to Baghdad, he learned of
the productive meetings in Amman between Kasasbeh and Iraqi
Finance Minister Bayan Jabr. Iraq, like Jordan, was eager to
reduce its debt burden, and had already concluded a deal with
Bulgaria to retire $3.8 billion. Because of income generated
from oil sales, Iraq was NOW in a position both politically
and financially to address its debt, and Kimmitt encouraged
the GoJ to engage its neighbor. Kasasbeh agreed with
Kimmitt's assessment, and said he had been tasked by new
Prime Minister Dahabi and the Royal Court to deal with Iraqi
debt; a follow-up meeting with his Iraqi counterpart had been
scheduled for after the Eid holiday. He continued that the
GoJ understood Iraq's need for a clean balance sheet in order
to attract private investment, and said Jordan had similar
concerns and needed the $1.3 billion in debt removed from the
ledgers of the Central Bank.


6. (C) Awadallah reiterated Jordan's commitment to assist
Iraq. Calling Iraq a "great country," he said it was rich in
mineral and human resources and poised to become a powerful
player in the region. Jordan was hopeful that assistance to
Iraq NOW would provide valuable, future dividends. He
explained that in 2005, the GoJ had lobbied Iraq to resolve
the bilateral debt issue, and was hopeful that upcoming talks
would yield success. Through the bilateral mechanism, Jordan
was prepared to consider investments, oil, export agreements,
as well as other avenues to retire the debt as long as there
was no significant adverse effect on its treasury.

Combating Money-Laundering to Attract Investment
-------------- ---


7. (C) Kimmitt applauded passage of the Anti-Money
Laundering (AML) Law, and said it was important that both
banks and governments do their utmost to thwart misuse of
international financial networks. He added that strong AML
enforcement gave countries a competitive advantage in
attracting foreign investment. He commended Jordan's
interagency approach to combating money laundering and
terrorist financing, and offered the continuation of U.S.
technical assistance. Awadallah shared U.S. views that a
strong AML environment helped to attract investment, welcomed
the offer of training, and appealed to the U.S. to resolve
the Arab Bank case, commenting that as Jordan's biggest bank
and an influential player in the economy, "it was important
to rectify the situation."


8. (U) Deputy Secretary Kimmitt cleared this message.

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Hale