For the First Time, American Loan Guarantees for Jordan

Yesterday the United States announced that it would guarantee up to $1.25 billion in loans to the Hashemite Kingdom of Jordan.

The announcement from the State Department said this:

The United States today re-affirmed its strong commitment to the people of Jordan by signing a sovereign loan guarantee agreement with the Hashemite Kingdom of Jordan. The United States’ guarantee makes it easier for the Government of Jordan to borrow money from international capital markets and provide critical services to its citizens as it enacts economic reforms while also hosting more than half a million refugees fleeing the violence inside Syria. The signing of this loan guarantee agreement fulfills the commitment made by President Obama in Amman, Jordan, March 22, 2013, when he announced his intention to work with Congress to provide loan guarantees to Jordan this year. This will be the first U.S. loan guarantee to the Government of Jordan. Pursuant to the loan guarantee agreement, the United States would guarantee repayment of principal and interest on the issuance of up to a $1.25 billion, seven-year Jordanian sovereign bond.

Jordan’s prime minister had this to say:

Prime Minster Abdullah Ensour, who signed the agreement on behalf of the Jordanian government, said this guarantee, which aims to support the economic and financial reform effort in Jordan, demonstrates the US’s outstanding support to Jordan by helping the country to fulfill its financing needs from international markets at better terms. In a speech after the signing ceremony, Ensour noted that the US Government, acting through USAID, plans to provide guarantees on Jordanian government bonds for the amount of US $ 1.250 billion for a period of up to 7 years. He pointed out that this loan guarantee agreement will enhance Jordan’s ability to borrow from international markets, while reducing its financing needs from the domestic market, providing room for the private sector to obtain the funds it needs to thrive. Ensour said this agreement will also allow Jordan to obtain external financing with competitive interest rates at par with US Government borrowing, which will reduce the Jordanian government debt service payments....

This is a very smart move by the Obama administration, providing tangible support for Jordan as it faces the problems arising from a region in turmoil--in Jordan’s case, turmoil that has saddled it with over a half million Syrian refugees and huge additional energy costs (because the pipeline from Egypt is not operating). Support for stability and prosperity in Jordan is a clear American interest, as the administration and both parties in Congress recognize.