Kuwait will pay US$1.25bn to Jordan through the Kuwait Fund for Arab Economic Development after the Gulf state’s government completes needed procedures, the state-run Petra News Agency reported, citing Jordanian Minister of Finance Suleiman Hafiz.
Kuwait will start transferring the money within two months, Hafiz told the agency.
The Gulf fund was allocated by the GCC during last year’s summit to support development projects in the Hashemite Kingdom.
Saudi Arabia, UAE, Kuwait and Qatar decided to extend US$5bn over a five-year period to support development schemes in Jordan. Each GCC nation will pay US$1.25bn.
The Kuwaiti grant will be used to finance capital spending within the budget, the minister said.
Jordan’s fiscal deficit could rise to JRD2.93bn (US$4bn) this year if economic conditions in the country do not improve, the Jordan Times reported in May, citing Hafez.
The kingdom’s fiscal deficit would be JRD2.06bn after the receipt of foreign aid and grants, the Amman-based newspaper reported, citing Hafez. The kingdom’s debt would rise to JRD17.5bn by the end of the year from JRD14.3bn.
The overall budget deficit increased to about 6 percent of GDP in 2011 as a result of commodity subsidies, and other social spending and borrowing by the government on behalf of Jordan’s National Electric Power Company to cover more costly imported fuel oil used during extensive periods of interrupted natural gas supply when saboteurs attacked pipelines in Egypt.
“Jordan remains highly dependent on commodity imports oil and grains, tourism receipts, remittances and FDI (foreign direct investment) flows, and external grants,” the International Monetary Fund (IMF) said in a report in April. The kingdom “is also facing risks from a further deterioration in its terms of trade, unrest in neighbouring countries, and the prospect of further disruptions to natural gas pipeline flows from Egypt”.
The kingdom’s public debt-to-GDP ratio increased to about 64 percent at the end of 2011.
Jordan, one of the smallest economies in the Arab world, imports almost all of its energy needs and finances its budget and current-account deficits with foreign investment and grants from Gulf states, the EU and the US.
Jordan’s economy is forecast to grow 2.8 percent this year from an estimated 2.5 percent in 2011, while inflation is projected to rise to 4.9 percent from 4.4 percent last year, according to the IMF.
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