Economists praise CBJ measures to stem coronavirus damage

AMMAN — Economists on Monday said that the Central Bank of Jordan's (CBJ) measures aimed at injecting JD550 million into the economy amid the coronavirus crisis "are a step in the right direction". 

"It is a good move. There needs to be cooperation between the public and private sectors to reduce the costs that will arise from the regression of economic sectors, such as tourism, industry and small- and medium-size enterprises," economist Wajdi Makhamreh told The Jordan Times on Monday.

Makhamreh said the pressure on the sectors could result in lay-offs and payment defaults. The CBJ's decision to extend the timeframe for repaying debts "will help a lot to ensure continuity and spare the government a lot of issues".

"The measures indicate that the government understands the situation, that the crisis will impact everyone, including the government itself, so there needed to be a sacrifice to allow economic sectors to resume activity to reduce the impact of the regression," the economist said.

Makhamreh said the government needs to have a plan B as well, aiming at resolving any developments related to economic regression.

"It is a national duty for all commercial banks to respond to this decision and restructure individual and company loans, extending the timeframe for repaying debts to the end of June if possible too," he said, noting that the impact “will not be clear at present”, but will show in three to four months. 

Adel Bino, an economist and professor of economy at the University of Jordan, said: "What the CBJ did is good to boost consumption, as we are currently at the stage of dealing with the problem, and not yet with its aftermath."

The CBJ's decision to lower commercial banks’ compulsory reserves from 7 per cent to 5 per cent "is to provide liquidity to the banking industry", Bino said.

"However, there is no guarantee that the borrowing is going to be used for consumption purposes or for dealing with and fighting the virus, which can only be efficient economically if done by the government not by individuals," he said.

"Individuals have a role to play, of course, but fighting the virus economically should be carried out by the government, to ensure the right decisions are taken in that regard," Bino added.

The Jordanian dinar, he said, is fixed against the US dollar, so interest rates must be further reduced and reflected immediately on the interest rates that banks have imposed on already existing loans.

Bino concluded that without this step, the policy "is unlikely to result in much".

The Jordan Restaurants Association (JRA) issued a statement on Monday praising the CBJ's response to the needs of the tourism sector after the damage it suffered due to the virus outbreak. 

The JRA called for postponing the payment of debts and reducing costs for three months, to be extended depending on developments, also postponing Social Security Corporation subscriptions and taking other related measures. 

The association also called for postponing the payment of sales and income tax as well as the payment of energy bills and reducing their costs, especially electricity, according to the statement. 

At the end of the crisis, the association suggested paying dues in installments over a year or more and without interest, the statement added.