RIYADH: Liquidity management in Jordan’s cash market is set to undergo a significant transformation as the country’s central bank introduces new tools for monetary policy.
Aligned with Shariah laws, the Central Bank of Jordan has introduced these instruments in collaboration with Islamic banks operating within the country. The goal is to enhance the effectiveness and efficiency of liquidity management in the cash market, the Jordan News Agency reported.
These new measures will not only assist Islamic banks in achieving more flexible liquidity management but also contribute to the establishment of an effective interbank market among them.
HIGHLIGHTS
• These new measures will not only assist Islamic banks in achieving more flexible liquidity management but also contribute to the establishment of an effective interbank market among them.
• The central bank will be able to provide Islamic banks with daytime liquidity, overnight liquidity, and liquidity extending up to one week.
• The goal of the new measure is to enhance the effectiveness and efficiency of liquidity management in the cash market.
Under the framework of these tools, the central bank will be able to provide Islamic banks with daytime liquidity, overnight liquidity, and liquidity extending up to one week.
This will be done based on the banks’ requests or at the apex bank’s initiative, allowing flexibility in terms of timing, amount, and duration. The Central Bank of Jordan will determine these parameters to align with its operational objectives in implementing monetary policy.
This move by the central bank comes as part of its efforts to develop the operational framework of monetary policy and diversify the tools at its disposal. The decision is in line with the best practices of central banks and addresses the specific needs of the local cash and banking market, as reported by PETRA.
In a related development, earlier in January, 16 Jordanian banks jointly launched the first private sector investment fund, committing $388 million to foster the growth of local businesses.
The Jordan Capital and Investment Fund, established in 2021 with a capital commitment of 275 million dinars ($387.6 million), was officially registered under the 2022 Investment Environment Law, the state news agency reported.
The instrument aims to inject money into emerging firms with growth, development, and expansion prospects, providing financing to enhance job opportunities and propel nationwide growth, as stated in an official statement reported by the Jordan News Agency.
As the country’s first and largest private sector investment fund, it is designed to allocate funds to vital and promising sectors, such as food and health security, manufacturing, and information and communication technology. The objective is to harness Jordan’s potential in building the future, it added.
At that time, Hani Al-Qadi, the chairman of the Jordan Capital and Investment Fund, had said the fund is crucial for achieving “accelerated growth” by fully leveraging Jordan’s economic potential.
