JORDAN REVISES ECONOMIC AID REQUEST, SEEKS UP TO $500

UNCLAS AMMAN 000204 SIPDIS SIPDIS STATE FOR NEA/ELA AND EEB STATE PASS USAID E.O. 12958: N/A TAGS: EAID ECON EFIN PREF JO SUBJECT: JORDAN REVISES ECONOMIC AID REQUEST, SEEKS UP TO $500 MILLION FOR FY 2009, 2010, AND 2011 REFS: A) 07 AMMAN 4790 B) 07 AMMAN 4575 C) 07 AMMAN 3584 ¶1. On January 20, Prime Minister Nader al-Dahabi presented to the Ambassador and the USAID Mission Director an ESF request for USD 500 million annually for fiscal years 2009, 2010, and 2011. The new request (sent electronically to NEA/ELA) supersedes the GOJ's December request for USD 450 million in baseline assistance; the GOJ maintains its one billion USD request for supplemental assistance to cover Iraqi-related expenses in 2008 and 2009 (Ref A). Given that this new request is only for ESF, a separate, multi-year request for Foreign Military Financing (FMF) is also expected soon. ¶2. Crediting USG support for improving Jordan's economic development, the new proposal outlines remaining economic challenges, including high budget and current account deficits, high poverty and unemployment, and modest income growth. The GOJ attributes its budget deficit to international oil and wheat price increases, which caused its budget deficit to grow from a targeted 3.4 percent of GDP to 5.4 percent of GDP, equivalent to USD 869 million. The 2008 budget deficit is projected at 5.6 percent of GDP, or USD 1 billion after grants. In the proposal, the GOJ reiterates its commitment to fully liberalize energy prices and grain subsidies in 2008, which will contribute to raising inflation from its current 5.4 percent to over 9 percent (Refs B and C). The request also notes that 780,000 Jordanians (13.5 percent) are living under the poverty line of USD 2 per day, and unemployment is 14.3 percent. ¶3. In the proposal, the GOJ explains that economic assistance will be used for economic development and reform in seven areas which have been planned for the next three years: -- legislative and judicial reforms (USD 65 million); -- investment (USD 301 million); -- fiscal and financial reforms (USD 1.65 billion); -- employment generation and vocational training (USD 94 million); -- social welfare (USD 2.94 billion); -- education (USD 711 million); and -- infrastructure (USD 10.56 billion). Among the infrastructure programs described are water, energy, transportation, rural roads, and the Aqaba port modernization projects. ¶4. The GOJ's total three-year budget estimates USD 16.3 billion in capital expenditures for the period 2009- 11. USD 5 billion will come from government resources, including regular donor assistance. USD 7.2 billion will come from private sector financing. USD 4 billion in development projects is unfunded. Visit Amman's Classified Website at http://www.state.sgov.gov/p/nea/amman HALE