CASE STUDYIBRD Helps Jordan Meet Critical Financial Needs
Through a Customized Financial Solution
The World Bank Treasury designed afinancial solution for Jordan that helped (i)increase the loan amount by 45 percent,(ii) lower the expected financing cost by
approximately two thirds 1, and (iii) extend
the average maturity of Jordan’s overall
debt profile.

The financial solution used donor guarantees tothe IBRD to increase the loan amount from USD 1billion to USD 1.45 billion, allowing Jordan tofinance the entire project at IBRD rates rather
than borrowing the additional USD 450 million atmarket rates. The approximately USD 72.5 million
savings in financing costs and the customized
amortization schedule (34-year total term, fouryear grace period) helped reduce the overall debt
payments and increased the average maturity of
Jordan’s debt, in alignment with its debt
management objectives.

BackgroundIn 2018, Jordan was facing critical financing needs.
The unprecedented regional conflicts decreased
government revenues due to a downturn intourism,exports,andinvestment.
While
expenditures increased as the country became thehost to Syrian refugees, and shouldered theirfinancial burden coupled with an upsurge insecurity, energy, and commodity costs.
Jordan responded by implementing a national
economic and fiscal reform program in coordination
with the IMF, mobilized theinternational
community through the Jordan Compact andlaunched the Jordan Economic Growth Plan to get
the country back on track by doubling economic
growth over 2018-23.
To fund the growth plan, Jordan needed financingthat would align with its debt repayment profile anddebt management strategy. More pressingly, the1Jordan’s borrowing cost from markets (7.7%) as per theJordan Bond (7 3/8 10/10/2047) versus 2.4% IBRD loan rateby the time of loan agreement

Photo Credit GCFF

government had to fund the debt repayments of thethree international bonds maturing in the next four
years 2, and close to 39 percent of the domestic debt
maturing in the next two years.
The World Bank worked on the second Equitable
GrowthandJob
Creation
Programmatic
Development Policy Loan with Jordan to support its
inclusive growth objectives.

Financial Objectives•••

Maximize financing for Jordan.
Reduce Jordan’s overall debt cost.
Smooth Jordan’s pressing debt repayments andlengthen the maturity of the debt profile.

Financial Solution and Outcomes
In June 2019, the World Bank approved a USD 1.45
billion Development Policy Financing, the second
loan in a programmatic series of two DPF
operations.
Increasing Loan Amount – Decreasing Expected
Financing Cost
The DPF utilized two bilateral guarantees to IBRD
from the Kingdom of Saudi Arabia (USD 200 million)
and from the United Kingdom (USD 250 million) to2

2018-22 period, amounting to USD 3.25 billion

CASE STUDY
increase the loan amount from USD 1 billion to USD
1.45 billion.
The guarantees allowed Jordan to borrow at IBRD
rates which provided a 500 basis points advantage
versus market rates at the time of the loan
negotiations, lowering Jordan’s expected financing
cost by approximately USD 72.5 million over the
next 34 years.
Loan Customization
By selecting a customized repayment schedule,
Jordan reduced the refinancing risk and adjusted
the amortization profile to meet their debtmanagement needs.
••

The four-year grace period pushed the loan
principal repayments further out to 2024 to bypass the most acute debt rollover cycle (201822). (Figure 1)
The 34-year total term with the Average
Repayment Maturity of close to 20 years spread
repayments over a longer period andlengthened Jordan’s total average time tomaturity from an estimated 5.8 years to 6.9years 3.

Figure 1. Jordan: Redemption Profile in JOD,M, and IBRD
Loan Customized Repayment Schedule
External (LHS)

6,000

Domestic (LHS)

IBRD Loan (RHS)

5,000
4,000
3,000
2,000

2054

2051

2048

2045

2042

2039

2036

2033

2030

2027

2024

2021

0

2018

1,000

100
90
80
70
60
50
40
30
20
100

The innovative financial solution helped immunize
Jordan’s budget against potential reallocations awayfrom the critical development activities, such as theJordan Economic Growth Plan.

World Bank Treasury’s Role•••

The World Bank Treasury team maximized
donor funding by ensuring that the financial
terms of the loan were agreeable to the donors
and the borrower through a series of bilateralengagements.
The team provided donors with mark-to-market
price calculations of the contingent liability of
their guarantees to IBRD.
The team worked closely with the client (Jordan’s
Ministry of Finance, Central Bank, Ministry ofDevelopment & Financial Cooperation), andinternally with the country team, project team,Legal Vice Presidency, and Global Practices indesigning the financial solution.
Summary of Financial Terms
First Tranche

Second Tranche

Effective
Date

June 5, 2019

June 26, 2020

AmountUSD 725 million

USD 225 millionTerm

34 yearsGrace period

4 years

Structure

Amortizing

Source: PDD, MOF, and CBOJ, World Bank Treasury

Contact: Miguel Navarro-Martin, Manager, Financial Products & Client Solutions, The World Bank Treasury
 mnavarromartin@worldbank.org  +1 (202) 458 4722
1225 Connecticut Avenue NW, Washington, D.C., 20433, U.S.A.

3External debt from 7.9 years to 9.2 years