Saudi gives Jordan economic boost

AMMAN // Saudi Arabia has given Jordan US$400 million (Dh1.4bn) to reduce a budget deficit caused this year by extra social programmes for struggling citizens, Jordan's finance minister said yesterday. Thursday.

The money will be used to mitigate the effect of soaring energy prices and also will be applied to infrastructure projects "that will improve the quality of services provided to citizens and ease some of the budgetary constraints," Mohammad Abu Hammour, minister of finance, told the Petra news agency. Jordan, which imports 96 per cent of its energy needs, is facing its worst economic crisis in years due in large part to a surge in international oil prices, Mr Hammour said.

The energy costs cut into Jordan's annual budget that was already exhausted by social spending.

To circumvent the political unrest sweeping the region, the government had already approved a $647 million (Dh2.3bn) aid package that included increases in civil servant' salaries and subsidies to ease the effect of inflation.

The government was said to be responding to public resentment over declining living standards.

"The grant will be included in the state budget for this year," Mr Hammour said.

The cash injection comes just as the Gulf Co-operation Council, led by Saudi Arabia, is considering a request by Jordan to join its six-member regional bloc.

Hassan Barrari, professor of political science at the University of Jordan, said Saudi Arabia has a vested interest in stabilising the Jordanian economy.

"Jordan is a monarchy surrounded by regional upheavals. The Saudis want to economically empower Jordan because they are aware that economic hardships are pushing people to go out to the street," Mr Barrari said.

"Saudis are hoping that the grant will help pacify the street while, at the same time, the government can put limits on the reform demands. That would set a precedent."

* with additional reporting by Reuters