JORDAN - July 10 - Rescheduling Deal With Paris Club Signed.

Finance Minister Michel Martu and the Paris Club creditors sign an agreement in Paris to reschedule $1.2 bn of Amman's debt repayment and interest until end-2007 and extend the repayment period for 22 years. The agreement is described by officials as a "good deal" for Amman. (The kingdom's debt to the Paris Club creditors amounts to $3.8 bn, including $1.52 bn of accumulated debts to Japan). Martu says it is the first time that the debts of a poor country have been rescheduled for a period in excess of the duration of its IMF programme. Last week Amman signed a 2-year programme with the IMF, committing the kingdom to cut state pensions, overhaul the tax system, and accelerate privatisation. Diplomats said the favourable terms reflected the political pressures Amman faced on its borders with Israel and Iraq, together with solid evidence of real intent of economic reform. Diplomats said they were impressed with Amman's launch of a home-grown Social Transformation Fund, which aims to provide $1 bn of social investment over the next three years. Amman officials said the Paris Club deal would ease annual servicing on the official external debt of around $821m, that consumes 25% of its $3.32 bn budget. The deal would free up allocations "to provide for rural areas, education and health", said Planning Minister Bassam Awadallah. Observers noted that the deal committed Amman to find an exit strategy from the burden of its $7.2 bn external debt. But diplomats said Amman has already rescheduled its debt five times with the Club, each time assuring creditors that the rescheduling would be its last. Officials blame a Palestinian uprising and post-Sept. 11 slowdown for the economy's failure to rise above 4% real GDP growth in the last two years. Amman has record foreign reserves of $3 bn in the Central Bank, and exports were up 23% from the first quarter of 2001.