US embassy cable - 03AMMAN6504

UNCLAS SECTION 01 OF 02 AMMAN 006504 
 
SIPDIS 
 
USDA FAS FOR MARY CHAMBLISS/ROBIN TILSWORTH 
CAIRO FOR FAS - ASIF CHAUDRY 
 
E.O. 12958: N/A 
TAGS: EAGR, EAID, JO 
SUBJECT: JORDAN: FY04 USDA FOOD ASSISTANCE RECOMMENDATION 
 
REF: STATE 181481 
 
1.  (U)  Summary.  Post recommends that $20 million in 
FY04 P.L. 480 Title I funds be set aside for a 
concessional loan that will help the government of Jordan 
procure U.S. wheat, with proceeds from the local sale of 
the wheat being used to fund agricultural productivity 
and rural development programs, including to help farmers 
use scarce water resources more efficiently.  This level 
of assistance would not displace commercial sales or 
local production and is consistent with a pattern of 
declining U.S. food aid levels as Jordan's economy 
becomes increasingly able to meet its food import needs 
commercially.  End Summary. 
 
2.  (U)  In recognition of critical U.S. foreign policy 
interests in Jordan and the major economic growth and 
development obstacles faced by this resource and water- 
poor country, Jordan has historically been a major 
beneficiary of U.S. food aid.  Food aid has helped Jordan 
meet the nutritional requirements of its relatively poor 
and growing population (per capita income was $1750 in 
2002), including during the recent (1999-2001) period of 
serious drought.  In addition, joint programming of the 
local currency generated by government sales of food aid 
provided under the 416(b) and P.L. 480 Title I programs 
has advanced agricultural reforms and productivity and 
promoted development in rural areas. 
 
3.  (U)  Until 1998, assistance was provided through P.L. 
480 Title I loans that Jordan used to procure U.S. grain. 
During the drought period between FY99 and FY02, food aid 
was provided in the form of wheat grants under the 416(b) 
program, with the United States donating 200,000 mt tons 
of wheat in FY02.  In FY03, food aid was again provided 
through a $20 million Title I concessional loan that 
Jordan used to procure approximately 135,000 mt of U.S. 
wheat.  (With annual consumption of approximately 650,000 
mt, wheat is the staple of the Jordanian diet.) 
 
4.  (U)  Along with Jordan's recovery from the recent 
drought, economic growth patterns have strengthened since 
2001, as the impact of extensive macroeconomic and 
regulatory and trade reforms implemented since the early 
1990s began to kick-in.  Until the conflict in 
neighboring Iraq interrupted traditional trade and energy 
ties earlier this year, real GDP had been growing at a 5% 
annual pace.  Analysts expect growth rates to return to 
and likely exceed that pace once the economy adjusts to 
the disruption caused by the war in Iraq.  Nevertheless, 
Jordan will continue to suffer from high rates of poverty 
and highly unequal income distribution for years to come. 
Rural and agricultural areas remain by far the poorest 
and least developed parts of the country. 
 
5.  (U)  Thus, despite economic progress, Jordan will 
continue to require U.S. economic assistance for the 
foreseeable future.  The year 2004 will be an especially 
challenging one for Jordan as the economy adjusts to the 
loss of oil and trade subsidies formerly provided by 
Iraq, with the government budget bearing the largest part 
of the adjustment burden.  Food aid will remain an 
important part of the assistance mix.  Local currency 
generated by government sales of food aid would continue 
to help agricultural and rural populations adjust to 
rapid economic change and in encouraging continuing 
agricultural reforms.  In addition, food aid has helped 
develop a lasting market for U.S. wheat and has not been 
found to displace commercial sales. 
 
6.  (U)  RECOMMENDATION:  Given these foreign and 
economic policy considerations, post recommends that the 
level of food assistance be maintained in FY04 at the 
same level as in FY03, i.e. that $20 million in P.L. 480 
Title I funds be set aside for Jordan for wheat purchases 
under the government to government program.  As in FY03 
and earlier years, local currency proceeds would be used 
to help finance GOJ programs that promote agricultural 
productivity through market-oriented reforms and more 
efficient agricultural use of scarce water resources. 
 
7.  (U)  This recommendation is consistent with a pattern 
of declining food assistance levels as Jordan's economy 
becomes increasingly self-reliant, but is also realistic 
in recognizing that Jordan will continue to require 
foreign assistance to meet its development and 
nutritional challenges.  In FY04, the challenge of 
adjusting to the economic impact of the Iraq conflict 
will be particularly acute.  In FY05 and beyond, we may 
want to continue pursuing gradual reductions of food aid 
levels, with a goal of eventually moving Jordan toward 
fully market-based procurement of its food needs. 
GNEHM