US embassy cable - 02AMMAN3227

C O N F I D E N T I A L AMMAN 003227 
 
SIPDIS 
 
TREASURY FOR A/S QUARLES, DAS RADELET, MICHAEL KAPLAN 
DEPT FOR E, NEA, EB 
NSC FOR CLAY LOWERY 
 
E.O. 12958: DECL: 06/16/2007 
TAGS: EFIN, JO 
SUBJECT: JORDAN FINANCE MINISTRY OFFICIAL ON DEBT AIMS 
 
Classified By: DCM GREGORY L. BERRY.  REASONS 1.5 B AND D. 
 
1.  (c)  In a June 16 meeting with Econ chief, Dr. Muhammad 
Abu Hammour, Secretary General of the Finance Ministry (the 
number two ministry official and the senior such official 
currently in town), said meetings in European capitals were 
"going well" regarding Jordan's request for a stock of debt 
treatment by the Paris Club next month.  He said that Finance 
Minister Marto had told him that the Germans and British were 
"on the right track," but he was unable to provide additional 
details of Marto's meetings.  In addition to Marto's 
meetings, Abu Hammour said Prime Minister Abu Ragheb would be 
discussing the request in Madrid and Brussels over the next 
few days.  (He did not mention Planning Minister Awadallah's 
meetings last week in Washington.) 
 
2.  (c)  The most important upcoming meeting would, Abu 
Hammour said, be King Abdullah's visit to Tokyo at the end of 
the month.  He said that as the largest creditor, Japan's 
support for "extraordinary treatment" from the Paris Club was 
essential.  He felt that recent indications by Japanese 
officials of a willingness to include post-cutoff date claims 
in a traditional two-year consolidation period were 
reassuring.  He thought that Japan could go further under 
sufficient pressure to maintain a multilateral Paris Club 
consensus. 
 
3.  (c)  Abu Hammour did not answer directly when asked if he 
thought there was any possibility that Japan would consider 
measures outside the Paris Club.  He thought that this would 
be consistent with the unilateral U.S. debt forgiveness and 
large debt swap programs provided by European creditors. 
However, he said that in his recent meetings in Tokyo with 
Foreign Minister Muasher, senior Japanese officials had 
emphasized Japan's economic problems as reasons why it was 
difficult for Japan to do more for Jordan (beyond $20 
million/year in non-project grant aid).  They also told Abu 
Hammour that Jordan's $3 billion in official reserves (8 
months of imports) showed that Jordan did not need extra 
support. 
 
4.  (c) In support of Jordan's ongoing need for balance of 
payments relief, Abu Hammour said he argued that 1) reserves 
would decline as a share of imports under the IMF program, 2) 
Jordan had still to feel the full impact on its exports of 
the aftermath of the September 11 attacks, 3) UN Compensation 
Fund transfers that amounted to over $500 million in 2000 had 
come to an end, 4) Jordan faced over $800 million per year in 
debt service, and 5) that the new economic investment program 
(PSET) would raise import requirements for the next several 
years.  He thought it ironic that given above market interest 
rates on Jordan's current debt to Japan, Jordan was 
effectively helping finance the Japanese economy. 
 
5.  (c)  Comment:  Abu Hammour's comments indicated that the 
Jordanians have clearly heard the message that a 
"Pakistan-style" stock treatment was more than creditors, 
including the United States, were prepared to provide. 
Nonetheless, he said this would remain Jordan's formal 
request to the Paris Club -- given that it had been enshrined 
in King Abdullah's recent letters to the Japanese and German 
Prime Ministers.  Abu Hammour stressed four basic themes 
driving Jordan's debt objectives:  1) That Jordan faced 
persistent large balance of payments funding gaps for the 
next ten years, 2) that Jordan had implemented major policy 
reforms under 12 years of IMF tutelage and that there was no 
need for more IMF programs to encourage more policy reforms, 
3) that Jordan's goal was thus to end the cycle of Paris Club 
and IMF programs, and 4) that high interest rates on pre- and 
post-cutoff date commercial and development aid debt to Japan 
were the core of Jordan's ongoing debt servicing problem. 
Gnehm