Experts: The decision to raise interest rates is prudent and save the dinar | Money and business | zad jordan news

zad jordan news –

Financial experts unanimously agreed that the Central Bank’s decision to increase interest rates on monetary policy instruments by 50 basis points maintains the attractiveness of the Jordanian dinar and its purchasing power.

They stressed that the central bank is the central bank, which has the mandate to manage monetary policy in Jordan and maintain balance in the banking market, according to their interview with Petra Agency.

The experts explained that the basic principles of monetary policy management are to control interest rates, up or down, to maintain the levels of money supply, to combat inflation levels, and to create a state of balance in the market, emphasizing that the Central Bank’s decision is based on an extensive study of local reality and the reasons for raising it or not.

They pointed out that the Central Bank of Jordan did not in all cases respond to the US Federal Reserve’s decisions to collect, and that there were cases in which the Central Bank decided not to collect on the basis of the state of the Jordanian market.

Former Minister of Finance, Dr. Ezz El-Din Kanakaria, said that the US Federal Reserve’s decision to increase interest rates by 50 basis points came to reduce financial liquidity and confront the inflation situation in the United States, and that in cases of inflation, central banks usually raise interest rates to reduce cash circulating among people and economic sectors, and this has led the Central Bank of Jordan to take a similar decision to raise interest rates on most monetary policy instruments to reduce the historical margin between interest rates on the dollar and the dinar, and to maintain the necessary protection against the exchange rate, and to maintain the strength of the dinar, and to avoid so-called cases in dollars. ”

He pointed out that this procedure has been in place for many years and will maintain monetary stability in the Kingdom, explaining that monetary stability is a basic requirement for economic growth and investment encouragement. There can be no economic growth and viable investment without monetary stability.

Kanakria added that the decision to raise interest rates has economic consequences in more than one aspect, requiring measures to be taken that will limit the economic consequences of this decision, especially as the interest rate hike decided by the US Federal Reserve is the highest increase represented over about 22 years. And he indicated that the increase in interest rates would lead to an increase in the interest rates offered by banks to depositors, which would entice them to increase their savings, while on the other hand would lead to an increase in interest rates for borrowers , whether individuals, companies or government loans, because the banks will increase the cost of their funds when they provide higher interest rates. For depositors, therefore, it will demand a higher interest rate than the borrowers, and it will offer a higher interest rate than the previous when applying to lend to the state through government bonds or others.

Regarding the extent of the impact of this increase on existing and new lenders of banks, Kanakriya stressed that banks need to consider several variables when approving the increase on existing or new lenders, as well as the interest rates offered to depositors.

He pointed out that it depends on the management of assets and liabilities for each bank separately, the value of liquidity available to it for lending, the volume and cost of deposits, the quality and conditions of loans, and the financial relationship between the bank and the customer. Therefore, it is not necessary for banks to reverse the entire increase in interest rates on all borrowers and depositors uniformly. He explained that lenders also strike the balance between the effects of the increase and their need for an incentive for borrowers and economic projects. to acquire bank financial facilities; As projects and economic sectors continue to solicit borrowers’ financial facilities to establish economic projects and increase investment, a major and important aspect is maintaining the viability of loans at banks and promoting economic growth in general. .

Kanakriya explained that there is a government interest in taking measures to limit the effects of the increase in interest rates; Because the rise in the cost of economic sectors, and their unwillingness to establish projects, has repercussions on economic growth and unemployment rates, and also on government revenue, which governs the interests of government, banks and various economic sectors to unite incentive decisions, such as the promotion of soft productive loans provided by the Central Bank, and the support of small projects; and the study of the possibility of revising the margin on the interest rate between the interest offered on deposit and the interest on loans are required, which are subject to various variables and conditions, in addition to a new review of the costs of economic sectors, including industries, exports and commercial sectors, to enable them to continue to perform and their economic activity to grow and absorb the impact of the increase in interest rates.

He stressed the need to study the necessary procedures for low-income people and borrowers for housing purposes so as not to be affected by the effects of high interest rates by launching special programs, and to access, if possible, soft loans to promote the necessary funding. government’s need, and optimal use of resources, especially since the information circulating the possibility of taking The US Federal Reserve will make another decision to raise interest rates in the coming months.

Kanakria explained that the official statements indicating the government’s intention to approve amendments to the Investment Act this month, which coincide with the sittings of the continuing economic workshops in the Royal Court, make the timing appropriate and important to take the appropriate measures discuss to promote economic growth and encourage investment, taking into account what has been said about the impact Increase recent interest in economic growth and investment and the alternatives available to counteract it.

The former Minister of Industry, Trade and Finance, Dr. Muhammad Abu Hammour, confirmed that the Central Bank’s decision to increase the interest rate by fifty points on monetary policy instruments is in response to a number of monetary and economic developments, and the successive increases in prices locally; Due to geopolitical and military developments in the region and the world.

He explained that the Central Bank’s decision improves monetary and financial stability in the Kingdom by maintaining the attractiveness of deposits in dinars, while seeking to curb inflation accompanied by successive price increases, noting that the Central Bank , in a positive step, maintained preferential rates. for the “Sector Financing” program. Vital Economics “and the” Support to Small and Medium Industries, Professionals and Crafts “program.

Abu Hammour stressed the need to take economic and financial steps and policies to ensure that the Jordanian economy continues to move forward in the path of recovery and growth rates that will positively reflect on the lives of citizens around the negative consequences which may arise to face. this decision.

The Chairman of the Economy and Investment Committee in the House of Representatives, dr. Khair Abu Sa’ilik, stressed that monetary policy studies the market and works to manage inflation levels by controlling the money supply by raising or lowering the interest rate, and explaining that the decision of the Central Bank of Jordan comes to increase the attractiveness of to retain the dinar and not to convert depositors’ savings into dollars. And negatively affected the purchasing power of the dinar.

He called on the fiscal policy makers in the Kingdom to adopt incentive policies to encourage investment and reduce production and energy costs, and to work towards the adoption of strategies that promote the sustainability and development of small and medium enterprises. ensure.

Abu Sa’ilek indicated that the desired economic development should be based on clear plans capable of providing support to various sectors, focusing on promising sectors and launching targeted programs that work to increase the growth of these sectors by ensuring lower financing costs and broader taxes incentives, and avoiding bureaucracy in procedures.

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