ABU DHABI: Jordan’s central bank does not plan to change the composition of its $11 billion foreign exchange reserves and it needs to be vigilant due to advancing inflation, Governor Umayya Toukan said on Sunday.
Jordanian officials have been insisting for the last two years they had no plans to change the composition of the oil-importing country’s currency reserves.
"It will not change. I do not think countries should rush to take such important decisions on daily rates," he told reporters after signing a loan agreement in the United Arab Emirates. "We will see for one or two years before taking action."
Jordan’s reserves, which are denominated in the dollar and cover over six months imports, are nearly 70 percent in the greenback and 30 percent in euros, gold and other currencies.
Weakness of the euro following the European debt crisis has recently turned the global market focus to reserve management.
The euro hovered near a three-week high against the dollar on Friday as European leaders said they would publish details about the health of European banks.
The Jordanian dinar is pegged to the dollar, a policy which the authorities say has served the national economy well.
The central bank (CBJ) has traditionally maintained high interest rates to preserve attractiveness of dinar assets and to hamper any excessive capital outflow into dollar assets.
It usually ensures a differential between dinar and dollar rates of around at least four percent to stem capital flight.
Toukan declined to comment on interest rate outlook but said the central bank needed to be on guard due to rising consumer prices.
"We are watching inflation and we should be vigilant about it," he said. Annual inflation in the kingdom accelerated to 5.2 percent year-on-year in May from 4.9 percent in April, helped by rising energy costs.
Economists expect average inflation to rise to 5 percent in 2010 from 2-3 percent last year.
The central bank embarked on monetary policy easing at the end of 2008 to mitigate the impact of the global downturn on the country’s sluggish economy. It cut benchmark interest rates by 50 basis points in February.