Ziad Fariz

GOVERNOR OF THE CENTRAL BANK OF JORDAN

Jordan 2016  I  Finance  I  Leader

BIOGRAPHY Born in the city of Salt, Jordan in 1943, he holds a Ph.d. in Economics from Keele University in the UK and a Bachelor Degree from the University of Baghdad, Iraq. He served as Minister of Planning and International Cooperation, Minister for Industry and Trade, and Minister of Finance. He has been the CEO of the Arab Banking Corporation and Chairman of Capital Bank.

OUR MONETARY POLICY HAS BEEN CONSIDERED SUCCESSFUL WITH OUR OBJECTIVE TO MAINTAIN THE MONETARY AND FINANCIAL STABILITY IN JORDAN.

HOW CAN THE CENTRAL BANK OF JORDAN CONTINUE TO MAINTAIN A HEALTHY BANKING AND FINANCIAL SECTOR?

Our banking system is sound and resilient; a healthy and stable financial sector is part of an attractive business environment which is important to attract FDI and enhance confidence in the Kingdom’s economy. The sector continues to play a critical role in Jordan’s economy; in 2015 total assets of banks constituted around 175% of GDP, and total deposits grew by (7.7%) to reach $46 billion.

 

Banks operating in Jordan are healthy and compete domestically and abroad and broadly follow international best practices. Financial soundness indicators reflected these strong fundamentals during the first half 2015, the capital adequacy ratio was 18.5%, which is higher than the level imposed by CBJ (12%) and the Basel Committee (8%). Non-performing loans fell to 5.5% from 8.5% in 2011; the coverage ratio of non-performing loans stands high at around 79.7%. Furthermore, stress tests and sensitivity analysis suggest the sector’s broad capability to withstand various negative shocks to non-performing loans, equity prices, interest rates and the exchange rate. The CBJ issued several regulations; most importantly the updated corporate governance regulations. Further, the CBJ proposed a draft instruction of Basel III regulations to banks for impact study, and it is expected to start implementing Basel III regulations by June 2016.

 

In addition, the new draft CBJ law will include financial stability as one of the main cornerstones of its mission statement. Monetary stability will remain the principal objective, but financial stability will be one of the primary targets given the importance of the financial sector as a platform for economic growth. Within this context, the CBJ is changing the banking law to provide the CBJ with sufficient room to broaden its financial supervisory to include other financial institutions. Our monetary policy has been considered successful with our objective to maintain the financial stability in Jordan. We will continue to monitor and implement the right policies to ensure that banks have reasonable liquidity, a suitable level of non-performing assets and a healthy level of assets. We will continue our open market operation and intervene when necessary to make sure liquidity is sufficient to meet the financing needs of the public and private sectors.

WHAT IS YOUR STRATEGY TO FACILITATE LENDING TO SME’S IN THE KINGDOM?

The CBJ is aware of the importance of the SMEs. The SMEs constitute 95% of Jordanian economic entities and 40% of GDP, creating 70% of the job opportunities. In light of its keenness to support SMEs due to their vital role in enhancing economic growth, reducing unemployment and reducing poverty, the CBJ in collaboration with the Ministry of Planning and International Cooperation and international and regional financing institutions, has been attracting funding for the SMEs’ sector that reached $430 million at competitive interest rates and suitable maturities, as well as guarantees for the granted loans. Till the end of 2015 $120 million of these loans have been utilized by more than 11000 SMEs. 67% of these SMEs were located outside Amman. Furthermore, these loans helped in creating more than 2600 new job opportunities.

 

The CBJ is also involved in providing facilities to banks in order to extend long-term financing to renewable energy, industry, tourism, agriculture and IT sectors including SMEs at relatively low rates. We are talking about JD1 billion available to the private sector of which JD202.5 million has been utilized by 274 projects. Another priority is financial inclusion, which has become a fundamental pillar and a pressing need in view of its role in improving the standard of living, empowering women, in the promotion of equal opportunities, and poverty reduction, thus achieving sustainable economic growth, and reducing unemployment and poverty rates. We have launched a national financial inclusion strategy with the participation of leading strategic partners, including the Association of Banks, the Ministry of Planning, the Ministry of Finance, the Ministry of Education and the Ministry of Labor.

WHAT IS THE IMPORTANCE OF FOREIGN DIRECT INVESTMENT TO JORDAN’S ECONOMIC GROWTH?

Jordan economy is opened for trade with international markets. Jordan has been considered to be a gateway for the region and we should continue to diversify our exports, not only to the Unites States but also to Eastern Europe and Asia. The Investment is among the main driving force behind economic activity. Foreign direct investment has played an important role in Jordan in the last decade, as it was a major contributor to the capital formation, promoting proper growth and sustainable development, and financing current account deficit. FDI represented around 10% of GDP on average during the last decade. Jordan has taken steps to encourage foreign investment and to develop an outward-oriented, market-based, and globally competitive economy. In particular, banking, pharmaceuticals, information and communication technology, tourism, and services sectors have all experienced key reforms in recent years. Jordan has a competitive investment climate, enjoys political and economic stability, has a solid framework of laws and regulations that guarantee investors’ rights and facilitate the investment process, in addition to having a strategic geographical location and being signatory to many trade treaty that allow products manufactured in Jordan easy access to international markets.

 

In the long run, the tourism sector will be among the best investment opportunities in Jordan, for example in the Dead Sea. The energy sector is also very interesting especially renewable energy. The Government is talking about establishing a new fund for investment that will enjoy certain privileges and it will be open for foreign investors to participate and invest in key sectors of the economy such as energy, transport, tourism, and infrastructure.