(MENAFN) A new law allowing Jordan to issue sukuk has been approved by both lower and upper houses of the parliament, giving the government a new tool to redeem its public finances, Reuters reported.
Sufian Elhassan, director of the research and information department of the House of Representatives, said that the new law will take effect in about a month after the government circulates it.
A sovereign sukuk would broaden Jordan's sources of funding, allowing it to tap strong global appetite for Islamic bonds, particularly in the Gulf.
The government is struggling to maintain the budget deficit around 5 percent of GDP, as its public finances are under pressure after Jordan increased subsidies and public-sector wages to limit social discontent, in addition to hosting tens of thousands of Syrian refugees.
Earlier this month, Jordan's finance minister unveiled plans to issue a seven to ten-year sovereign, conventional eurobond worth between USD750 million and USD1.5 billion to foreign banks.
Because global investor demand for sukuk exceeds supply, Jordan might be able to issue Islamic bonds more cheaply than it could sell conventional bonds.