Jordan's forex reserves up 31% since Jan -cenbank

AMMAN, Nov 8 - Jordan's net foreign reserves rose 31 percent to $10.153 billion at the end of September compared with the start of the year as assets in dinar-denominated savings grew, central bank data showed on Sunday.

The kingdom's reserves stood at $7.74 billion at the start of the year and had been on an upward trend since a $2 billion debt buyback in March last year brought reserves down to $5.2 billion.

Bankers attribute the rise in foreign reserves mainly to the the Central Bank of Jordan's policy of allowing a wider interest rate differential against the dollar in favour of the dinar that had encouraged banks and depositors to keep funds in dinars.

Even Jordanian expatriates whose earnings were in foreign currencies were switching part of their savings into the dinar, attracted by interest as high as 4 percent compared with less than 1 percent on dollars, bankers say.

A main plank of monetary policy is the defence of the dinar, which is pegged to the dollar, a policy that the International Monetary Fund says has served the national economy well.

They say maintaining the country's reserves in a comfortable position was crucial to allow the kingdom to pay for its imports and service its foreign debts.

The steady build-up in reserves has also helped the CBJ over the last year to cut interest rates, inject more liquidity into the economy and prod private banks into cutting lending rates to spur growth.

Despite the global downturn's impact on the economy which has slowed growth and domestic consumption, the kingdom has not seen any steep falls in capital inflows or capital flight, officials say.

Economic expansion is expected to slow to around 3 percent this year, almost half the 5.6 percent real growth attained last year, officials say.