Grant will improve Jordan's fiscal stability after increased spending widens budget deficit
Saudi Arabia has given Jordan a $400 million cash grant that will improve the country's fiscal stability after extra social spending earlier this year widened the budget deficit, Jordan's finance minister has said.
Mohammad Abu Hammour said the cash grant will be channelled to infrastructure projects and capital expenditure which had been curtailed in a 6.369 billion dinar ($8.98 billion) revised budget last February that allocated more funding to a $650 million social package.
The Saudi grant would help Jordan consolidate its finances to ensure a robust upturn and maintain a 2011 budget deficit target at 5.5 percent of gross domestic product despite a soaring oil import bill and extra social costs.
Protests that have swept across North Africa and the Middle East reached Jordan and pushed the authorities earlier this year to introduce a social safety net to mitigate the impact of food inflation that many blame for the eroding standard of living among lower and middle class Jordanians.
"This will reflect positively on the level of services granted to Jordanians and will help to overcome some of the difficulties faced by the budget," Abu Hammour said.
Jordan hoped to cut the budget deficit to 3 percent of gross domestic product by 2013, Abu Hammour said.
Jordan was also hoping its future alignment with the Gulf Cooperation Council (GCC) which last month welcomed Amman's future membership could bring financial benefits for its struggling economy.
The kingdom has traditionally had close business and economic ties to the oil rich region and businessmen hope better access to Gulf markets could boost Jordanian exports while easing labour restrictions could reduce unemployment.
The economy relies on heavily on aid and remittances from a large expatriate labour force working in the Gulf.
Despite uncertainty from current unrest in the region, Abu Hammour said he was confident the outlook for the economy was "very positive" with more investment and tax incentives in the pipeline to attract higher foreign direct investment and regional capital inflows.
The government still maintained a 3.5 percent growth target his year, in line with IMF projections, seeing economic recovery gathering momentum, Abu Hammour said.