CBJ foreign reserves are at ‘comfortable, reassuring’ levels

(Photo: Ameer Khalefih/Jordan News)
AMMAN — Experts and bankers concur that the Central Bank of Jordan's (CBJ) foreign reserves are at comfortable and reassuring levels, and that last month’s slight decline in foreign reserves has had no significant impact on the national economy.اضافة اعلان

According to the statistical bulletin issued by the CBJ, the bank’s foreign reserves declined in the first month of this year by 0.8 percent compared to the level at the end of last year, reaching JD12.68 billion, compared to JD12.79 billion at the end of 2021.

Banker Muflih Aqel said that the decline has no significant effect because it is a small, negligible, percentage, the level of reserves is comfortable and does not pose any danger to the stability and safety of the dinar exchange rate, gold prices, inflation and economic stability.

Asked whether there is any connection between the decline in foreign reserves and the recent bank acquisitions — Jordan Capital Bank acquired Societe Generale Bank Jordan and the Arab Jordan Investment Bank acquired the National Bank of Kuwait — Aqel said that Jordanian banks acquire non-Jordanian banks due to the latter’s need for liquidity, to their failure to garner a good share of the local market due to the limited spread and, thirdly, because of citizens’ preference to conduct transactions through local banks, for the ease of dealing with them.

Secretary of the General Syndicate of Owners of Jewelry and Jewelry Trade and Crafting Rebhi Allan said that the price of gold locally is not affected by any internal event, thus not affected by the decline in foreign reserves, but rather follows changes in gold prices globally; these, he said, are decided by the level of supply and demand, which in turn is determined by crises and global events and the financial data on the dollar exchange rate, which is the main player.

Allan said that since the beginning of the Ukrainian crisis, a month ago, gold price increased globally by $100 per ounce, and that was reflected on the local price through the equivalent of JD2 for each weight of gold and its different carats.

The reason, he said, is that when a global crisis arises, investors turns to gold as a safe haven that preserves their wealth, which increases the demand for gold and brings the price up, as a result.

Writer and economic analyst Salama Al-Darawi, who works as a consultant for the Jordanian Banking Association, denied any effect from this decline because the foreign reserves are currently at levels, sufficient to cover the Kingdom’s needs for up to 9 months.

He added that in the banking sector, acquisitions have a significant role in increasing the economic and financial base of banks and that merger policies are a healthy indicator of the health and vitality of the banking sector.

Before the recent mergers, Jordan had 24 banks, “a number that matches and exceeds what exists in the economies of large countries, even in European countries”, said Darawi, adding that the competition between foreign banks and local banks was weak because of the share of foreign banks in the Jordanian market, which was modest in relation to the goals they were seeking to achieve.

Jordanian banks have a competitive advantage, as evidenced by the fact that more than 60 percent of the ownership of their shares belong to non-Jordanians, a liquidity ratio that is more than 136.2 percent, he added.

Investment in the banking sector is one of the most feasible in Jordan, said Darawi, adding that “the recent acquisitions by Jordanian banks of a number of foreign banks reflect the strength of the banking sector, which is a major and real supporter of the economy, and an attraction for investment”.

Did the decline in foreign currency change demand on dinars or other currencies in local market? A well-known bureau of exchange employee said that supply of and demand for Jordanian dinars and foreign currencies is at normal levels and he did not notice any change during the last period.

The CBJ annual report (2019) considered the value of foreign reserves, which was lower than it is now, at $14.3 billion, as being at comfortable levels, according to the international standards used to measure the adequacy of foreign reserves, and said that it was sufficient to cover the Kingdom’s imports of goods and services for three months.

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