Jordan financial/political risk summary

Jordan: risk assessment
Sovereign risk Currency risk Banking sector risk Political risk Economic structure risk Country risk
June 2011 B B B CCC B B

Stable. The government has found buyers for its debt at the domestic banks in the past. However, the sovereign riskrating will continue to be undermined by Jordan’s reliance on foreign grants and by its wide structural fiscal deficit, both of which have increased in the wake of domestic and regional unrest.Sovereign risk

Currency risk

Stable. The Jordanian dinar will remain pegged to the US dollar. Although the current-account deficit will narrow in 2011-12, foreign direct investment will be lower in 2011-15 than in 2006-08, which may put downward pressure on the currency, especially if the regional and domestic political situation worsens.

Banking sector risk

Stable. The Central Bank has tightened financial regulation in recent years, and Jordan’s banks have been left relatively unscathed by the global financial crisis.

Political risk

The unrepresentative nature of parliament and the limited progress on the political reforms that were promised after popular protests in early 2011 could raise tensions between the government and the opposition, led by the Islamic Action Front. Palestinian participation in government will also be contentious.

Economic structure risk

Jordan has a high level of public debt and relies on inflows of foreign aid and workers’ remittances to finance its fiscal and current-account deficits. It has limited natural resources and depends on imported oil.