Al Aqabah Port, Jordan's only seaport

As foreign aid and remittances declined in the 1980s, Jordan started to draw down its foreign reserves. In 1980 Jordan's international reserves, including gold and hard currency, totaled US$1.74 billion. By 1983 international reserves had shrunk to US$1.24 billion--US$824 million in currency, and US$416 million in gold. By 1986 international reserves had been reduced to US$854 million currency reserves were down to US$438 million but gold reserves remained at previous levels. The Central Bank of Jordan (hereafter Central Bank) held about US$130 million, and the rest was held by Jordan's private commercial banks. Whereas total international reserves were sufficient to cover six months' worth of imports in 1980, by 1986 they equaled only three months' worth of imports.

In the late 1980s, the government resorted to borrowing to cushion the economy from the shortfall of outside income. In 1970 external debt stood at US$120 million. By 1980, however, external debt had risen to about US$1 billion, and in 1986 it stood at US$4.13 billion. Total debt outstanding, including undisbursed debt (obligations contracted but not yet received as loans), was US$4.31 billion. Whereas lower figures were reported by various sources, such figures presumably did not count as debt some soft loans for development or trade credits that could be construed as debt or aid.

Earlier loans had been contracted at concessional interest rates through foreign export credit agencies, other Arab governments, and multilateral agencies. Debt to such official creditors rose from US$2.3 billion in 1982 to US$2.8 billion by 1986. Beginning in 1983, however, Jordan started to supplement soft loans from governments with commercial credit. In 1982 debt to private creditors stood at US$512 million, but by 1986 that amount had tripled to US$1.5 billion. Funds raised on the Eurodollar market (dollars held and loaned by European banks) included four commercial loans obtained between 1983 and 1987. But 1987 Eurodollar borrowing totaled US$640 million.

In part because it had previously borrowed so little, Jordan was regarded as a good credit risk. But as the country borrowed more and as it turned to private sector creditors, terms tended to stiffen. For example, although the average interest rate that Jordan paid in 1986 (7.3 percent) was the same as in the early 1980s, the amount of debt subject to variable interest rates had doubled to 20 percent of total debt thus, Jordan was more vulnerable to a possible increase in world interest rates. At the same time, however, almost 50 percent of all debt remained at concessional interest rates. In 1986 Jordan paid an estimated US$610.5 million in debt service, of which nearly US$431.8 million was for principal and nearly US$178.8 million was for interest. These short-term interest and principal payments as a percentage of export earnings--the debt service ratio--rose from less than 8 percent in 1980 to almost 29 percent in 1986.

Data as o11f of December 1989