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* IMF mission in Amman this week
* Jordan growth lower on regional woes
* Jordan launches $500 mln Eurobond issue
By Suleiman Al-Khalidi
AMMAN, Nov 3 (Reuters) - Jordan will begin negotiating a new funding programme with the International Monetary Fund (IMF) this week to help boost its growth which is flagging after regional turmoil hit its main trade links, the central bank governor said on Tuesday.
Zaid Fariz said an IMF mission will travel to Amman this week to discuss the main components of a new extended facility fund to replace a three-year, $2 billion standby arrangement programme that ended this summer.
Fariz also said Jordanian officials were in London to launch a $500 million Eurobond issue this week. Pricing was expected on Wednesday with the bond finalised by end of the week, he said.
The IMF said in July its programme had stabilised Jordan’s economy after it suffered severe fiscal strains brought on by higher spending in the aftermath of the ‘Arab Spring’ protests in the region in 2011.
It was too early to talk about the size of IMF financing under the new facility, which could be concluded by the first quarter of next year, Fariz said.
Officials have said on condition of anonymity that the programme could secure the kingdom up to $2 billion in loans.
The governor said the size of the facility would be calculated based on Jordan’s total exposure to the fund.
The new IMF programme would help the country maintain the pace of structural reforms while consolidating financial stability and cutting debt, Fariz said.
“The challenge we face is faster growth beyond the present rates, to maintain low budget deficit, maintain fiscal stability and reduce debt,” Fariz said.
Jordan’s government has already lowered its growth forecasts for 2015 several times. The latest estimate for GDP growth stood at between 2.6 to 2.9 percent, Fariz said. At the start of the year the 2015 GDP growth forecast was 3.5 percent.
Fariz said the economy had been hit by commercial ties with main trading partner Iraq being ruptured due to conflict there. Iraq receives around 20 percent of Jordan’s exports - over $1.2 billion worth - annually.
In addition, Syrian rebels took over Jordan’s main border crossing with Syria this year, disrupting a billion-dollar trade in both directions.
Jordan’s annual GDP growth has fallen to around 3 percent after averaging 6.5 percent before 2009. The medium term target is around 4.5 percent
The economy has also suffered under the arrival of nearly a million refugees from Syria and Iraq, who now make up about 20 percent of the population.
Fariz said the stability of the economy meant it had mostly remained resilient in the face of regional turmoil.
The planned Eurobond had seen strong investor interest, a sign of confidence in the Jordan’s performance under IMF guided reforms, Fariz said.
Jordan’s budget deficit in 2015 was expected to stay around the same as last year’s level at 3.3 percent of GDP, helped by foreign grants that traditionally cover shortfalls. In 2016, the deficit target is 3 percent of GDP.
Jordan’s main achievement was to have gradually reduced the combined public sector deficit by some 5.3 percent of GDP over the past three years, the IMF said.
Fariz said the government was committed to keeping a tight rein on spending. Modest public sector pay hikes would be compensated by an expected growth in revenues from improved business activity, he added.
Jordan’s foreign debt climbed to 21.6 billion dinars ($30 bln) after a series of borrowing agreements, including a $1.5 billion U.S. guaranteed Eurobond last June that allowed the kingdom to borrow at low terms, Fariz said.
Reducing debt remained a top priority, he said. The kingdom’s debt to GDP ratio is above 79 percent, considered too high for a developing economy.
Reporting by Suleiman Al-Khalidi; Editing by Raissa Kasolowsky