x Abu Dhabi, UAETuesday 25 July 2017

Gulf states pledge cash to Jordan

Saudi Arabia is about to deposit $250 million with Jordan's Central Bank as part of an $800m planned contribution to help the country's ailing economy.

AMMAN // Saudi Arabia is about to deposit $250 million with Jordan's Central Bank as part of an $800m planned contribution to help the country's ailing economy.

The money is part of a bigger, five-year, $2.5 billion (Dh9.2bn) fund that the Gulf countries decided to set up last December at a summit in Riyadh to help finance development projects in the kingdom. Morocco received a similar commitment.

Economic instability in Jordan comes at a volatile time for a region in turmoil from Syria to Gaza.

Gulf donors such as Saudi Arabia, which rescued Jordan with a cash injection of $1.4bn a year ago, have held off from giving direct budget support so far this year, with speculation about the reasons ranging from heavy spending by Gulf nations to stave off disaffection at home, concern about corruption in Jordan, and more pressing regional priorities, according to senior diplomats and economists.

A Saudi delegation that held talks in Amman on Wednesday has now agreed to finance $487 million worth of projects in the energy and water sectors and another $300 million in infrastructure projects would be approved by year end, Jordan's prime minister, Abdullah Ensour, said after the talks.

Sheikh Abdullah bin Zayed, the UAE Minister of Foreign Affairs, said last week the Gulf states were looking at more ways to help Jordan's ailing economy after a government decision this month to cut fuel subsidies sent energy prices soaring and led to protests, some of which turned violent.

Jordan will also soon be getting another $125m from Kuwait to finance projects slated for this year, Mr Ensour said, adding that Kuwait had already deposited $250m with the country's monetary authorities in development aid.

Mr Ensour said the kingdom had also reached a memorandum of understanding with Qatar to commit itself to extend up to $1.25 billion in project finance.

Jordan hopes the fuel-subsidy cuts will help show its commitment to fiscal consolidation and win support from the International Monetary Fund (IMF), western and Arab aid, and help it to tap capital markets in a Eurobond issue.

Economists have said Jordan's ability to maintain a costly subsidy system and a bloated state bureaucracy, whose salaries consume the bulk of state expenditure, is increasingly untenable in the absence of large foreign capital inflows or infusions of foreign aid.

Its annual budget deficit now stands at more than $3bn - about 11 per cent of GDP - and the government has been forced to rely heavily on borrowing from domestic banks, having struggled to reduce its budget deficit to secure a $2bn loan from the IMF.