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Central bank keeps a firm grip

An inflation rate of only 2%, a stable currency and reserves at $3.5 billion demonstrate the stress Jordan has put on having a tight and rigorously enforced monetary policy.

This has not always made Umayya Toukan, governor and chairman of the board at the Central Bank of Jordan, popular with the business community and some government ministers. He has been accused of keeping interest rates so high that growth is strangled as investment decisions are delayed. The country's best companies have to borrow at between 7% and 8%.

Toukan is unrepentant and rejects suggestions that interest rates are too high, pointing out that 5% growth is near the target level. "We have also done an exercise with the IMF, comparing the interest rates of countries with a similar economic structure. Our level of interest was not out of line with the median level of other countries," he says.

He remains committed to rigorous control of the money supply. "Monetary policy aims to provide enough liquidity, but only just enough liquidity, to finance the desired level of economic growth, but not one Jordanian dinar more," he says.

The governor believes that "any excess liquidity will find its way into creating inflation.

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