Investment will help support new development projects in aid-dependent country
Saudi Arabia has pledged a US$487m assistance package to help support new development projects in Jordan.
The first US$125m will be transferred soon while the remainder will be included in the 2013 budget, Jordan’s Prime Minister Abdullah Ensour said in comments published by state-run Petra news agency.
An additional US$250m deposit will be transferred into a special account for the Saudi Development Fund as part of a GCC-wide pledge to pump US$5bn into the Hashemite Kingdom, it added.
At a GCC summit in December 2011, Saudi Arabia, the UAE, Kuwait and Qatar agreed to extend US$5bn over a five-year period to support development projects in Jordan, with each state contributing US$1.25bn.
Kuwait transferred the first tranche of the GCC countries’ support for this year in October.
Jordan, which has one of the smallest economies in the Arab world and imports 96 percent of its fuel needs, finances its budget and current-account deficits with foreign investment and grants from the Gulf states, the EU and the US.
The kingdom’s public debt-to-GDP ratio increased to about 64 percent by end-2011. Its fiscal deficit could rise to JD2.93bn (US$4bn) this year if economic conditions in the country do not improve, the Jordan Times recently reported, citing Minister of Finance Suleiman Hafez.
The kingdom’s debt would rise to JD17.5bn by the end of the year from JD14.3bn, said Hafez.
The overall budget deficit has increased to about six percent of GDP in 2011 as a result of commodity subsidies, 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 over the past year and a half.
The government accumulated over JD2.8bn in debt because it had to produce electricity from fuel rather than gas as a result of the disruption of supply from Egypt.
“Jordan remains highly dependent on commodity imports like oil and grains, tourism receipts, remittances and FDI flows, and external grants,” the International Monetary Fund 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,” it added.