And here is the text:
Jordan Times
Paper losses and real gains
"The Jordanian dinar has been pegged to the dollar at the rate of $1.41 since 1995. It stayed with the dollar when it appreciated by 20 per cent or more against other major currencies, including the euro, and it should stay with the dollar when it declines against other currencies by similar percentage.
More than one commentator expressed worry that the Jordanian economy may get hurt if the dinar stays pegged to the dollar, because a weaker dollar means a rise in Jordan’s foreign debt expressed in dinars or dollars, especially when some 40 per cent of Jordan’s foreign loans are denominated in euros and yens.
This worry is not justified because what the worried commentators are talking about is only a paper loss, which may show up in the present day statistics. Such a loss does not cost the Treasury a penny until such loans become due for payment in future years, when no one can predict exchange rates.
No one believes that the current depressed exchange rate of the dollar is going to stay forever. It is a cycle with continuous ups and downs. The reasons for the present low exchange rate of the dollar are of temporary nature, such as the real estate finance crisis in America and the involvement in high-cost wars in Afghanistan and Iraq. All these conditions will not continue forever, and the American economy will no doubt recover, as it always did after recessions.
On the other hand, one should take into consideration that the Jordanian Treasury is a recipient of lots of grants and foreign aid, mostly in dollars, in excess of the debt installments payable on yearly basis.
Thus, most of the loss on the debt side is of paper nature, but is more than compensated by real gains or avoiding real loss on the side of revenues from foreign aid.
The Treasury’s best interest is served by continuing the pegging of the dinar to the dollar, to maintain the value of foreign grants flowing into the Kingdom from America and Arab Gulf states in US dollars.
Likewise, the best interest of the Central Bank of Jordan is also well served by staying with the dollar, which forms the major part of the foreign exchange reserve. If we make the dinar stronger than the dollar, the foreign exchange reserve will lose $7 billion, almost equal in value to the foreign debt.
In other words, both the Treasury and the Central Bank see their interest in the same way, i.e., by staying with the dollar. They are the representatives of the so-called overall interest of the country.
The voices calling for the disengagement from the dollar may serve and encourage imports and outgoing tourism, and hurt and discourage exports and incoming tourism. This is obviously the last thing needed by the economy to repair imbalances.
The governor of the Central Bank resolved the question, upholding the pegging of the dinar to the dollar, not for political considerations that do not exist, and not because the dollar is sacred, because it is not, but in order to maintain monetary and economic stability and to avoid the negative consequences, some of which I mentioned above.
It is therefore time to close the files on the subject and stop arguing about an issue already resolved by the competent authority.
More than one commentator expressed worry that the Jordanian economy may get hurt if the dinar stays pegged to the dollar, because a weaker dollar means a rise in Jordan’s foreign debt expressed in dinars or dollars, especially when some 40 per cent of Jordan’s foreign loans are denominated in euros and yens.
This worry is not justified because what the worried commentators are talking about is only a paper loss, which may show up in the present day statistics. Such a loss does not cost the Treasury a penny until such loans become due for payment in future years, when no one can predict exchange rates.
No one believes that the current depressed exchange rate of the dollar is going to stay forever. It is a cycle with continuous ups and downs. The reasons for the present low exchange rate of the dollar are of temporary nature, such as the real estate finance crisis in America and the involvement in high-cost wars in Afghanistan and Iraq. All these conditions will not continue forever, and the American economy will no doubt recover, as it always did after recessions.
On the other hand, one should take into consideration that the Jordanian Treasury is a recipient of lots of grants and foreign aid, mostly in dollars, in excess of the debt installments payable on yearly basis.
Thus, most of the loss on the debt side is of paper nature, but is more than compensated by real gains or avoiding real loss on the side of revenues from foreign aid.
The Treasury’s best interest is served by continuing the pegging of the dinar to the dollar, to maintain the value of foreign grants flowing into the Kingdom from America and Arab Gulf states in US dollars.
Likewise, the best interest of the Central Bank of Jordan is also well served by staying with the dollar, which forms the major part of the foreign exchange reserve. If we make the dinar stronger than the dollar, the foreign exchange reserve will lose $7 billion, almost equal in value to the foreign debt.
In other words, both the Treasury and the Central Bank see their interest in the same way, i.e., by staying with the dollar. They are the representatives of the so-called overall interest of the country.
The voices calling for the disengagement from the dollar may serve and encourage imports and outgoing tourism, and hurt and discourage exports and incoming tourism. This is obviously the last thing needed by the economy to repair imbalances.
The governor of the Central Bank resolved the question, upholding the pegging of the dinar to the dollar, not for political considerations that do not exist, and not because the dollar is sacred, because it is not, but in order to maintain monetary and economic stability and to avoid the negative consequences, some of which I mentioned above.
It is therefore time to close the files on the subject and stop arguing about an issue already resolved by the competent authority.
Fahed Fanek
24 March 2008 "
Well it's only something that they write on paper. Things may change without notice. Anyway Alhamdulillah. And may we all be blessed with his bless. And pray that this thing wasn't something to lead us astray from Him.
p/s: Hoping to hear good news from JPA (PSD) really soon. ;P
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