* Aid package by Gulf states agreed in June
* $1.1 bln in deposits cushion foreign reserves - central bank
* Aid package cushion’s debt ridden economy -officials (Adds accords signed, details and quotes)
By Suleiman Al-Khalidi
AMMAN, Oct 4 (Reuters) - Gulf states have deposited over $1 billion in Jordan’s central bank as part of a $2.5 bln package to shore up the kingdom’s struggling economy.
The three states, Saudi Arabia, Kuwait and the United Arab Emirates, announced the aid package in June after IMF-backed austerity measures sparked some of the largest protests in Jordan in years.
As well as the deposits, Saudi Arabia and the United Arab Emirates also committed $250 million each in budget support to Jordan over five years, while Kuwait pledged $500 mln in project finance over five years.
Conservative Gulf states feared the protests against IMF-backed price increases and proposed tax reforms could lead to instability in neighbour and staunch U.S. ally Jordan, which has long backed their foreign policy positions, and could have repercussions on their own security.
Senior officials from all four countries signed an agreement in Amman on Thursday on the deposit of funds.
The $1.1 billion in deposits will help cushion Jordan’s $11 billion in foreign reserves, while the direct budget support will ease pressure on the government.
“It will consolidate financial and monetary stability and confidence in the Jordanian economy and spur growth,” Central Bank of Jordan governor Ziad Fariz told Reuters.
“This will bolster the reserves and allow the treasury to implement it’s projects to provide better services with the least burden possible,” Fariz added.
Under an IMF austerity plan Jordan must rein in budget spending to cut spiralling debt now at $37 billion, equivalent to 95 percent of gross domestic product.
The country’s economic growth has been hit in the last few years by high unemployment and regional conflict weighing on investor sentiment, according to the IMF.
Kuwait was the first to place $500 mln in the Central Bank while another $333 million were received each on Thursday from Saudi Arabia and the United Arab Emirates, a Jordanian government source said.
Last month Jordan’s government sent a new tax bill to parliament, which it wants to push through this year to help it get a clean bill of health from the IMF to avoid higher servicing costs on over 1 billion dinars ($1.4 billion) of foreign debt due in 2019.
Credit guarantees extended by the Gulf states on Thursday would also help Jordan avoid being downgraded by credit ratings agencies, officials said.
The UAE alone extended $200 million in guarantees to allow Jordan to secure cheaper World Bank credit for much-needed infrastructure projects.
Jordan’s key role in providing geopolitical stability in the Middle East already makes it one of the highest per capita recipients of foreign aid in the world, according to figures from USAID, the U.S. aid agency. The kingdom receives over $1 bln a year from the United States, its largest donor, as well as aid from Europe and elsewhere. (Reporting by Suleiman Al-Khalidi; Editing by Toby Chopra and Susan Fenton)