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Thursday, 22 October 2009

Jordan to cover deficit by sukuk


Jordan is considering issuing Islamic debt, or sukuk, by the year end to help it cover part of its spiralling budget deficit that has worsened due to the global downturn, finance ministry officials said yesterday.

They said a finance ministry committee was set up to study how to introduce the Islam-compliant paper for the first time in the kingdom, which relies on conventional six-month, one-year and three-year maturity T-bills and bonds.

Jordan's monetary authorities have resorted this year to issuing more public debt instruments that are auctioned to local banks and financial institutions to fund government spending.

Economic decision makers are seeking more innovative ways to finance a deficit worsened by the inability to cut down a bloated public sector that drains finances by high spending on salaries, pensions and debt interest, a government official said.

"Sukuk instruments could help finance government projects and finance the deficit, especially since the government now is resorting only to lending from local banks," said a ministry official.

(Reuters)

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