March 16, 2020 / 9:52 PM / 16 days ago

UPDATE 2-Jordan cuts main rates by 100 basis points to soften coronavirus blow

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By Suleiman Al-Khalidi

AMMAN, March 16 (Reuters) - The Central Bank of Jordan said it cut its main interest rates by 100 basis points to 2.50% in the second such move in nearly two weeks to spur an economy hard hit by the coronavirus.

The benchmark interest was cut to 2.50% from 3.50%, a senior central bank official told Reuters, adding the move followed the U.S. Federal Reserve’s slashing interest rates to near zero to cushion the blow of the epidemic on the world economy.

Jordan’s currency is pegged to the dollar and the kingdom follows Fed moves almost unfailingly.

On March 4, the Central Bank of Jordan cut its main interest rates by 50 basis points, which also followed a similar U.S. Fed cut prompted by fears over the impact of the spreading coronavirus.

The interest rate cut is the fifth since last August, which have collectively brought down benchmark rates by 225 basis points, a central bank official said. The central bank announced a package of measures on Sunday to help troubled businesses and individuals by instructing commercial banks to postpone loan payments for companies and retail customers.

More significantly it slashed compulsory reserves for commercial banks to inject more than 500 million dinars ($705 million) of liquidity to ease the economy’s woes. The move was the first in nearly a decade.

Central Bank Governor Zaid Fariz told Reuters the measures were aimed at “preserving financial and fiscal stability” by extending support for hard-hit economic sectors that were beginning to show cash-flow and liquidity problems as a result of the drop in business.

Officials are worried the crisis that has hit the thriving tourism sector, which generates around $5 billion annually, will slash growth projections and deepen an economic downturn.

Jordan’s government suspended trading in the Amman Stock Exchange (ASE) from Tuesday until further notice, after the market plunged in recent days and the bourse was forced to reduce trading limits and trading session hours.

The country has closed all tourism sites, including its most visited attraction, the ancient city of Petra in southern Jordan. Thousands of foreign tourists have left the country in the past few days and hotels occupancy rates have fallen dramatically.

Reporting by Suleiman Al-Khalidi; Editing by Sandra Maler, Grant McCool and Leslie Adler

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