200521 Jordan
Jordanian people shop in a mall in preparation for Eid Al Fitr amidst concerns about the spread of the coronavirus disease (COVID-19), in Amman, Jordan May 18, 2020. Image Credit: Reuters

Amman: The International Monetary Fund on Wednesday approved a $396 million (Dh1.45 billion) loan to Jordan to address pressing financing needs after the country’s economy was hit hard by the coronavirus.

Jordan’s finance ministry said in a statement that the Rapid Financing Instrument (RFI) with a low interest rate was timely “given the limitations on external borrowing due to COVID-19.” Finance Minister Mohammad Al Ississ said earlier this month that the country’s budget deficit was expected to rise by at least a billion dinars (Dh5.2 billion) as government finances are dealt a heavy blow from the loss of revenues during a two-month lockdown.

The country’s 2020 growth was also expected to decline by 3.4 per cent this year, compared with the IMF’s 2.1 per cent growth forecast before the crisis, Al Ississ said.

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The IMF approved a $1.3 billion four-year programme for Jordan last March, which the kingdom hopes will provide financing from its major Western donors worried about the country’s stability.

Any new borrowing will increase the record public debt of $42 billion that is now expected to exceed 100 per cent of gross domestic product, up from the current 97 per cent.

Jordanian officials have not ruled out borrowing from global markets in coming months to help cover some of the country’s extra financing needs, although Al Ississ cautioned that credit markets were also affected.

The cash-strapped government has already resorted to more domestic borrowing from banks in the past two months to cover financing needs, bankers say.