(MENAFN - Jordan Times) Standard & Poor's (S&P) on Wednesday affirmed its long- and short-term foreign and local currency sovereign credit ratings on Jordan at 'BB/B' with a negative outlook.
The recovery rating is "4". The transfer and convertibility assessment is "BBB-".
The international rating agency said in a statement e-mailed to The Jordan Times that Jordan's ratings are constrained by the vulnerability of its economy to regional economic and political shocks, and by its limited fiscal flexibility.
The ratings are supported by the country's geopolitical importance, which underpins strong donor support and funds much of the country's persistently large current account deficit.
S&P pointed out that commodity price inflation in Jordan and the fallout from regional instability have translated into slower-than-expected economic growth, weaker external balances and larger fiscal deficits.
The statement said Jordan's close relations with donor countries, as well as the government's fiscally prudent emergency measures, have partially helped it meet its fiscal and external financing needs.
However, S&P indicated that government's efforts have not fully offset the decline in foreign reserves, the increase in government debt, and structurally weakened public finances, adding that increasing dependence on donor support is limiting the government's medium-term planning capabilities and is becoming an increasing vulnerability.
The agency pointed out to the 2 billion Stand-By Agreement between Jordan and the International Monetary Fund, announced Wednesday, saying the loan would alleviate Jordan's short-term liquidity constraints to some extent and could strengthen donor appetite to meet Jordan's financing needs.
In regards to the negative outlook for the Kingdom's credit rating, the agency said the perspective reflects its view that it could lower the ratings if there are delays or shortfalls in foreign grants, and if Jordan's external and fiscal financing needs become more acute.
"If oil prices increase, political tensions in the region rise, or foreign grants fall short of our current expectations by year-end - worsening either the fiscal or external profile - we could lower the ratings. Similarly, if the domestic political environment were to become more difficult, we could also consider lowering the ratings," the statement said.
But S&P said that it could revise the outlook to stable if planned political and economic reforms proceed or if grants delivered before year-end exceed expectations.
If Jordan's relationship with the Gulf Cooperation Council became more institutionalised, facilitating more measurable and predictable foreign assistance, the agency said it would consider this a rating strength.