Moody's lowers Jordan rating over regional unrest

08/02/2011

AMMAN, Jordan (AFP) -- Moody's on Tuesday lowered the outlook on Jordan's "Ba2" foreign currency government bond rating from stable to negative because of political turmoil in the Arab world.

"This announcement was triggered by Moody's concern that fiscal and economic downside risks related to ongoing turmoil in the region have risen following events in Tunisia and Egypt," it said.

The credit rating agency said it has also "downgraded the government's local currency bond rating to Ba2 with a negative outlook from Baa3," and Jordan's local currency ceilings were downgraded to Baa1 from A3.

"Jordan does not display limited capital mobility. Nor is there evidence of a significant bias in the government's ability or willingness to service its debt in favor of local currency," it added.

"This rating action also reflects higher fiscal and economic downside risks," Moody's said.

It warned that it may downgrade Jordan's Ba2 government ratings "if there were disruptive political turmoil that threatened a structural weakening of Jordan's credit fundamentals relative to rating peers."

This could include a deterioration in the balance of payments leading to a significant decline in official foreign exchange reserves or a sustained fiscal slippage that caused a jump in public debt, it said.

Jordan's King Abdullah II last week sacked the government and appointed a new prime minister to push through reforms to counter popular discontent inspired by Tunisia's revolt and anti-regime protests in Egypt.

The tiny desert kingdom faces several chronic socio-economic challenges, including a high rate of unemployment, which is officially reported to be 12.5 percent.

"Moody's notes that this is one of the higher rates in the region and similar to that of Tunisia. Poverty is also reported to be widespread and corruption is perceived to be an issue," said the agency.

"Moreover, over the past year, consumer price inflation increased to around six percent in December."

Source: Ma'an News Agency.
Link: http://www.maannews.net/eng/ViewDetails.aspx?ID=358129.