AFP - Standard and Poor's on Friday downgraded its long-term local currency ratings for Jordan citing rising government debt and weaker fiscal flexibility.

"The rating actions are based on our view of the kingdom's weaker medium-term fiscal flexibility and the associated rise in government debt," S&P credit analyst Luc Marchand said in a statement.

The long-term local currency credit rating was cut to BBB- from BBB, the short-term local currency rating at A-3 and also affirmed the kingdom's foreign currency rating of BB/B.

Despite planned fiscal restraint in 2010, Jordan's net borrowing requirements have increased as a result of lower grant revenues and rising expenditure, which is expected to reverse the trend of declining debt that prevailed until 2008.

But the agency also noted the country's relatively good economic prospects, with growth expected to average five percent annually in the next three years.

This is "better than trough of three percent in 2009, but well below the 2004-2008 average of over 8 percent annually, which was underpinned by strong foreign direct investment and inflows of remittances from Arab countries."

Jordan's political stability is also helping the government to achieve "significant fiscal consolidation and progress with structural reforms," S&P said.

But the agency warned that any significant rise in regional political and security challenges, or further slippage in fiscal and economic reform, could undermine the country's foreign and local currency ratings.