Jordan cuts reserve requirements, frees up JOD 700 mn for banks hit by Gulf war fallout

Jordanian banks and other players hit by fallout from the war in the Gulf are getting a USD 1.1 bn emergency package. The JOD 760 mn initiative will also include direct financing for hard-hit tourism players and to shore-up food security.

How it’s structured: Jordan’s central bank will cut its reserves requirement for banks to 5% (from 7%) for commercial banks and 4% (also from 7%) for Islamic lenders. That will unlock some JOD 300 mn in lendable liquidity. A further JOD 400 mn comes from slashing the central bank’s outstanding deposit certificates from JOD 550 mn to JOD 150 mn. Together, that puts some JOD 700 mn back into the financial system.

AND- Food companies will get some JOD 60 mn in concessional finance for essential imports.

The package also includes financing for tourism players to help them pay for operating expenses and salaries. Bookings in the sector have fallen by as much as 90% since war broke out in the Gulf..

Jordan is following a playbook from Egypt and the Gulf: Qatar’s central bank slashed reserve requirements to 3.5% instead of 4.5% earlier in March, and the UAE is estimated to have injected some USD 8 bn in liquidity in the banking sector as of last week, via a mega support package that was rolled out mid-March.