Finance Ministry explores transferring NEPCO debts to national debt

Ministry of Finance
An undated photo of the Ministry of Finance. (File photo: Ameer Khalifeh/Jordan News)
AMMAN—The National Electric Power Company (NEPCO) and the Ministry of Finance are studying the prospect of transferring all of the company’s debts to the state’s national debt, a move that would be unprecedented for the public sector. According to Al-Ghad News, the move is being considered in order to give NEPCO a chance to find new sources of funding to close its multibillion-dinar debt.اضافة اعلان

Economic analyst Mazen Irshaid told Jordan News that he does not expect the government to adopt this proposal due to a stark contradiction with previous policies. 

“The estimated total debt that NEPCO owes stands at approximately JD2.5 billion. Transferring this debt to be a part of the national debt will contradict the Ministry of Finance’s previous policy towards money borrowed from the Social Security Corporation (SSC),” he said.

Irshaid clarified by saying that “questions will be raised if the NEPCO debts are to become a part of the national debt because we have to keep in mind that the government owes the SSC up to JD6 billion.”

Two years ago, the government left out the debt it owes to SSC from the national debt. “People will notice this inconsistency if NEPCO’s debts are to be included into the national debt, and they will ask why the SSC debts are not included also,” Irshaid added.

“The exclusion of certain debts owed to entities like the SSC are done mostly with the motivation to keep the national debt percentage attractive enough for international organizations and other actors, who might act as creditors for Jordan by providing monetary assistance through bonds like Eurobonds. I estimate that there is nearly JD9 billion excluded from the national debt,” Irashaid said.

“NEPCO is in a rather difficult situation at the moment because it needs to repay its debts as soon as possible, but even doing so will not be easy, especially if it aims to finance its debt repayment through loans from local banks,” he added.

“Most banks evaluate the borrower’s loan history to assess if they are a reliable borrower. Given NEPCO’s tough situation, one can only wonder if they will be successful in convincing banks to extend them with new loans,” he concluded.

Economist Wajdi Makhamreh told Jordan News that the incorporation of NEPCO’s debts into the national debt would most probably “increase the financial burden on the government’s capacity to repay its pre-existing debts,” while such a move could be positive, in the sense that it would emphasize the need to repay NEPCO’s debt.

“A massive contributor to the financial problems facing NEPCO today is the fact that many of its associates and customers, like corporations and individuals, are simply not paying NEPCO the rightful amounts that is owed. There needs to be a more aggressive collection policy conducted by NEPCO to partly solve this,” Makhamreh stressed.

NEPCO’s problems with efficiently collecting its debts that are owed to them are largely driving them towards the undesirable option of having to resort to borrowing money in the form of loans, as a means of continuing to finance their operations, he said.

Makhamreh also said that the government’s debt is cumulative. “The national debt is approximately $50 billion, and it has been accumulating over the years. While reducing the national debt is not easy by any means, some steps for the government to consider include cutting down on costs, as well as boosting investment projects throughout Jordan.”

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