Jordan has entered talks with the International Monetary Fund to borrow up to $ 1.4 billion, Finance Minister Suleiman Al-Hafez said yesterday, to ease strained public finances in the absence of help from its Arab neighbors.

The request for funds comes as austerity policies are prompting street protests by citizens concerned about subsidy cuts and price hikes - a threat to stability in a kingdom that saw months of protests from early last year inspired by the "Arab Spring" uprisings.

Al-Hafez told reporters Jordan would draw the funds from a new IMF lending instrument known as the "Precautionary and Liquidity Line", launched last November to give countries with relatively good economic policies a short-term liquidity window.

Jordan had sought a $ 1.8-billion, five-year lending facility in two tranches but the final amount would be less, Al-Hafez said.

"The amount has gone down to $ 1.4 billion but until now there is now set amount that we can draw from," Al-Hafez said. He gave no further details.
Last year, Jordan's subsidy-heavy economy was kept afloat by a $ 1.4 billion cash injection from Saudi Arabia.

Over the last decade, successive governments have adopted expansionist policies characterized by sizable state subsidies and salary increases. A further strain on public funds was caused when new state jobs were created in an already bloated public sector last year to head off greater unrest.

Jordan began an austerity drive last month, raising fuel and electricity prices, imposing higher taxes on luxury goods and increasing corporate taxes on banks and mining companies.

Some opposition groups held street protests against price hikes on Friday and warned the authorities that the austerity measures could trigger wider demonstrations and even civil disorder in impoverished areas.

Al-Hafez said the government would not touch subsidies on bread or on cooking gas on which a majority of the country's 7 million people, mostly on low incomes, depend. He also promised not to raise electricity prices for the poor. But the measures already introduced would not be repealed.

"We will not postpone any measures and the situation has begun to stabilize and take on a reformist path. If it had not been for these reforms in our subsidies program we would have faced more hurdles," Al-Hafez said.

The first package of measures was expected to produce savings of around 300 million dinars ($ 423 million), he said, helping avoid the risk of a budget deficit soaring above 2 billion Jordanian dinars ($ 2.8 billion). The deficit target was initially just 1.027 billion dinars or 4.6 percent of GDP.

Economists say Jordan's ability to maintain a big subsidy system - which currently costs over $ 3 billion annually - and a large state bureaucracy, whose salaries consume the bulk of the $ 9.6 billion of state expenditure, was increasingly untenable in the absence of large foreign capital inflows or infusions of foreign aid.

Last week Jordan raised the price of lower grade gasoline, used by the poor, by 12.9 percent.

Two weeks ago the price of premium petrol was increased by 20 percent while electricity tariffs have also been substantially raised for major industrial and service sectors of the economy, including banks and hotels.

The government had also hiked prices of bulk LPG, heavy fuel oil for industry, jet fuel and bunker fuels in a move economists say will add to inflationary pressures in the country and hurt its exports competitiveness by increasing costs.

The government has long been mindful of public fury that exploded into street clashes in the depressed south of the country after two gasoline price hikes in 1989 and 1996 but has been forced to take measures to stem a widening budget deficit that threatens to worsen the country's economic plight.