Experts mixed on S&P B+/B sovereign credit rating

S&P (Flickr)
(Photo: Flickr)
AMMAN — Standard & Poor (S&P), the international credit rating agency, affirmed this week Jordan’s sovereign credit rating at B+/B and maintained a stable future outlook despite global economic chaos and high prices resulting from the Russia-Ukraine conflict, coupled with the global repercussions of the COVID-19 pandemic. The agency attributed this rating to structural reforms implemented by the government during the pandemic and supported by the International Monetary Fund’s (IMF) reforms program.اضافة اعلان

According to investment and economic specialist Wajdi Makhamreh, the rating reflects a positive view of Jordan based on economic reforms being implemented by the government, and also as a result of IMF reports stating that Jordan is cracking down on tax evasion and adopting a balanced monetary policy.

Makhamreh stated that the outlook is also based on the reopening of all economic sectors following the extended lockdowns, “which will contribute to economic growth, albeit not significant enough to meet expectations.”

Makhamreh stated that the rating agency will, undoubtedly, have certain reservations and Jordan will have to mend its economic standing to maintain the rating, adding that credit agencies have their own standards of rating, based on the current situation and future expectations. “When expectations are not met, the rating would be reconsidered within one year,” he added.

Commenting on the report’s mention of a decrease in Jordan’s unemployment rates, which peaked at 25 percent in the first quarter of 2021 and dropped to 23.2 percent in the third quarter, as well as a 1.5 percent decrease in public budget deficit from its level in 2021, Makhamreh said these improvements remain insufficient and much work needs to be done for Jordan to address those issues.

According to economic expert Mohammad Al-Basheer, these international agencies are nothing more than political institutions that serve as extensions of the policies of the major financial powers. “This is the crux of the issue, as there have been no real economic reforms, and Jordan continues to suffer from significant negative economic indicators such as a low growth rate, a trade balance deficit, and an unemployment crisis.”

Basheer said that while cash deposits are abundant, those deposits belong to individuals and not to the government. “Debt is rising, there is an enduring budget deficit, and tax burdens on both citizens and businesses, as well as an general hike in prices due to the sales tax, the COVID-19 pandemic, and now the Russian-Ukrainian war.”

According to Basheer, these indicators do not correspond to the assessment of B+/B, adding however that the years 2020 and 2021 are not comparable due to the global circumstance. “I do not think it is a fair rating,” he said.

Economic hardships facing both the government and citizens, according to Basheer, can be seen in the number of pensioners looking for work, which impacts the youth search for job opportunities. He added that it is extremely difficult to consider the credibility of these rating agencies’ assessments and indicators in general.

No improvement will be realized in Jordan unless the root cause of the economic crises is addressed, according to Basheer, including high sales tax, the inability of the industry and agriculture sectors to assert and rectify their presence, and the failure of Jordan to reduce its imports bill despite a slight rise in GDP.

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