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Published: Tuesday December 3, 2013 MYT 9:12:12 PM
Updated: Tuesday December 3, 2013 MYT 9:13:08 PM

Jordan to use Gulf aid to spur economy hit by Syria crisis

AMMAN (Reuters) - Jordan aims to spend at least $1 billion (609 million pounds) next year in mainly Gulf-financed development projects to spur its aid-dependent economy, badly hit by an influx of 1.2 million Syrian refugees, the planning minister said on Tuesday.

Jordan, along with Lebanon and Turkey, is one of the main host countries for Syrians fleeing fighting between President Bashar al-Assad's forces and rebels trying to topple him.

Planning and International Cooperation Minister Ibrahim Saif told Reuters the strain on services and resources created by the refugees, mostly hosted by local families, was now felt more deeply as the Syrian conflict drags into its 33rd month.

He estimated that this had cost Jordan at least $1.7 billion this year. Other officials put the bill much higher.

Saif said the protracted nature of the conflict meant Jordan had to switch from providing food and shelter for the refugees to spending more on infrastructure "with the assumption it's a medium-term crisis (of) three to five years".

His ministry coordinates billions of dollars in foreign loans and grants that make Jordan one of the world's top aid recipients on a per capita basis. The United States alone provides some $1 billion a year in economic and military aid.

Saif said economic growth expected to hover at around 3.5 percent in 2014 would be supported by faster spending from a $5 billion fund allocated to Jordan by Gulf states in December 2011. The kingdom has allocated this mostly for development projects that cannot be funded from its $11.4 billion budget.

"We will be injecting money when there is a slowdown in the economy," Saif said, endorsing estimates that the Syrian crisis has cost Jordan at least two percent of its annual growth.

LOWER BORROWING COSTS

Extra aid from Western donors to help Jordan cope with the refugee crisis has eased fiscal pressures. Without it, he said, the deficit would have hit around nine percent of gross domestic product this year, instead of a more manageable 5.4 percent.

Saif said the World Bank would grant Jordan a $200 million loan by end-2013, the second this year. The bank has raised its annual aid ceiling to Jordan to $500 million from $350 million.

Jordan is also finalising a 180 million euro loan from the European Union to help it cope with regional turmoil, Saif said.

Tapping markets with loan guarantees such as October's U.S. government-backed $1.25 billion eurobond with a low 2.5 percent coupon has reduced Jordan's borrowing costs, Saif said.

"Due to the Syrian crisis...we are in a position to get favourable terms and we are borrowing at least to provide enough liquidity for development needs and support budgetary finances."

Jordan has been criticised by some international donors and NGOs for pushing them to spend more of their aid money on Jordanian citizens, rather than on Syrian refugees.

But Saif said U.N. agencies were also shifting from a purely emergency response to helping Syria's neighbours meet huge humanitarian needs arising from the conflict in the long term.

"Donors know that in order to reduce tensions and not to create sentiment against Syrians, you need to enhance existing capacity that requires a kind of medium-term commitment, not just immediately provide them with vaccines and water," he said.

The Syrian crisis had also meant Jordan was losing out on business opportunities and foreign investment inflows. "The cost of instability is something you cannot account for," he said.

Nor is any immediate solution in sight, Saif argued.

"Even if a political process starts soon, refugees will not necessarily be back as soon as that process is started."

(Editing by Alistair Lyon)

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