Syrian refugees strain Jordan

Long serving as a home for displaced Palestinians, Jordan's economy is now buckling under the strain of the influx of refugees and the impact of the wider conflict in neighbouring Syria.

The new camp for Syrian refugees at Mreijeb Al Fohood in east-north Jordan is being prepared to receive refugees. Salah Malkawi for The National

Ducking and diving between the neat rows of whitewashed mobile homes, children play chase as the sun sets behind the gently rolling desert plains in Jordan's Halabat district.

They are among the 2,900 Syrians seeking shelter in the UAE-funded Emirates-Jordanian Camp, located 80 kilometres north-east of Amman. Many of the 770 homes are empty, ready for their intake of more families escaping the terror of Syria's bloody civil war.

By the year's end, the number of Syrians refugees across Jordan is forecast to swell from the existing 500,000. Jordan's King Abdullah estimates the percentage of Syrians in Jordan's overall population could rise to 20 per cent by then, from 10 per cent now.

Long serving as a home for displaced Palestinians, Jordan is now buckling under the strain of the latest influx of refugees and the wider impact of the conflict in neighbouring Syria.

Standard & Poor's Ratings Services last week lowered the kingdom's sovereign rating a notch further into junk status to BB-minus, while warning about further downgrades.

"Jordan has been facing some exogenous shocks from Syria not only in refugees but transit trade, tourism and regional stability," said Masood Ahmed, the director of the Middle East and North Africa Department at the IMF.

Another shock has emerged from the repeated disruptions to the flow of Egyptian natural gas that Jordan relied on for about two years to the end of last year. As a result of the disruption, Jordan was forced to secure energy from other sources, pushing up the cost of its energy bill to a record 4 billion Jordanian dinars (Dh20.75bn)

Both shocks have ravaged public finances. The budget deficit swelled to 9.7 per cent of GDP and public debt swelled to 75 per cent of GDP last year.

In an effort to bolster its depleted finances, Jordan plans to raise as much as US$2bn in bonds backed by the United States government, the finance minister, Umayya Toukan, told Bloomberg.

Last year Jordan signed a $2bn loan deal with the IMF. Under the agreement, the government is gradually swapping costly energy subsidies with more targeted cash transfers, a move it hopes will cut its deficit to 8.9 per cent this year.

"We are confident the reforms we're taking will lead us to economic recovery and future prosperity. We're already seeing positive signs in terms of strong foreign reserve levels, fiscal consolidation and of higher gradual growth rates," Abdullah Abdulkarim Hamdan Ensour, the prime minister of Jordan, said during the weekend's World Economic Forum on the Middle East and North Africa.

Funds from $5bn in grants from GCC members will allow the Jordanian government to lift capital spending from $900 million last year to $3.1bn in the next two years, he said.

But the government is also keen that spending is better channelled than in the past.

Many ordinary Jordanians complained of not feeling the benefits of the average 6 per cent annual GDP growth achieved from 2000-10. Economic growth this year is forecast by the IMF to reach 3.3 per cent.

Joblessness stands at nearly 13 per cent, while the challenge businesses face of excessive red tape and difficulty accessing finance has been exacerbated by the influx of Syrians.

Crime is also a problem. Families in Amman report a rise in people from tribal areas stealing cars and kidnapping maids before demanding a ransom for their release.

"We seek inclusive growth: the key to economic growth in the future," said King Abdullah at the World Economic Forum.

But whatever the hopes for the future, the immediate fate of Jordan's economy is only likely to improve when conflict in Syria subsides and the hundreds of thousands of displaced Syrians return home.