JORDAN’S NEW PM TOLD TO ‘PERFORM, OR ELSE’
▶ Country faces demands from IMF to reduce its large debt-to-GDP ratio
Omar Al Razzaz, the man appointed to lead Jordan’s new government, faces the task of bringing in urgent economic reforms while placating a public strongly opposed to more austerity measures.
The stakes are high. While the government faces a US$750 million (Dh2.75 billion) deficit and demands from the International Monetary Fund to reduce its debt-to-GDP ratio (currently more than 95 per cent), Jordan is wracked by the largest protests seen in the kingdom since 2011.
They continued on Monday evening even after the resignation of former prime minister Hani Mulki.
King Abdullah II yesterday officially appointed Mr Al Razzaz to form a new government and immediately gave him with the job of obtaining a national consensus on the controversial income tax law that sparked the upheaval.
The bill, which was introduced on Thursday, would broaden the individual tax base and increase business tax.
Reforms led to the prices of everyday items, from hummus to fuel, increasing significantly but they passed with little more than grumbling on social media.
With businesses and retailers facing an unusually quiet Ramadan, Thursday’s tax bill prompted Jordanians to demonstrate in huge numbers.
Mr Al Razzaz’s background as a former World Bank economist suggests he will maintain the government’s reform agenda.
Before leading the Education Ministry in the departing government, Mr Al Razzaz earned a PhD from Harvard University and did post-doctoral studies at Harvard Law School, held an assistant professorship at the Massachusetts Institute of Technology and served as the World Bank’s country manager in Lebanon.
He has written several academic papers and chairs several boards in Jordan.
Mr Al Razzaz is also credited with excellent communication skills and an ability to reach out to different constituents, which will be essential if he is to sell a vision of economic reform to Jordan’s disaffected youth, of whom more than 30 per cent are unemployed.
“He is liberal, open-minded, a good listener and democratic,” said Imad Hmoud, an independent business analyst in Amman.
“But he will face a difficult task. He thinks outside the box but, without a carte blanche, it will be difficult for him to adopt economic reforms. The entire economic system is based on collecting taxes. We need sound economic reforms at this point.”
In an address appointing Mr Al Razzaz, King Abdullah advised the government to overhaul the tax system, defuse rising tension and address public grievances over austerity.
Analysts suggest this will be a tall order, saying the resignation of Mr Mulki was just one of the protesters’ demands.
“It is a cosmetic change and will not have a big impact,” said Amer Sabaileh, a political analyst and director of Middle East Media and Political Studies Institute, a think tank with a branch in Amman.
“The reaction to the protests by changing the prime minister and the government does not match actions. There is an accu-
The king advised the government to overhaul the tax system, defuse tension and address grievances over austerity
mulation of mistakes, from the structure of the governments that are not elected to the misguided policies that negatively impacts the economy.”
Mr Sabaileh likened the government shake-up to treating a serious illness with a mild painkiller.
“The street has mobilised due to pent-up grievances, this requires major solutions,” he said. “The public is fed up with government policies. If public grievances are not addressed, protests may get out of hand.”
King Abdullah has sounded a warning to Jordan’s government: perform or else.
“We must acknowledge that there has been underperformance, laxness and hesitance in decision-making,” he told editors of the country’s newspapers on Monday.
“This has been addressed and officials and governments were dismissed.”
King Abdullah expressed displeasure at being forced to step into the country’s politics.
“This is not my role,” he said. “My role is to be the guarantor of the constitution and the balance of powers. Each power, and each official, has to be up to the responsibility.
“Those who cannot deliver should leave their positions to those who can.”
As several thousand protesters marched through Jordan’s capital Amman on Monday following prime minister Hani Mulki’s resignation, they chanted: “No to Mulki, No to Razzaz.” It was a response to now-confirmed rumours that former World Bank economist Omar Al Razzaz had been appointed prime minister in a bid to subdue demonstrators. King Abdullah II has been engaging with representatives of various industries and community groups. He has instructed his forces to safeguard the protestors and citizens. His response has helped contain the crisis. But the government faces an uphill battle. Amid rising public debt, an influx of some 700,000 Syrian refugees, conflicts in neighbouring Iraq, Syria and Palestine and double-digit unemployment, the government was forced to sign a $750 million loan deal with the International Monetary Fund in 2016, introducing a raft of austerity policies that squeezed the middle class. The recent income tax law was the final straw.
But real change will be hard to achieve, despite the resignation of one prime minister and the appointment of another. Mr Mulki has been praised for his “bravery in taking difficult decisions that do not gain popularity” by King Abdullah, who asked him to remain as caretaker until a new government is formed. Meanwhile, the Professional Unions Association chief said it will continue its industrial action until the income tax law is withdrawn. And protest organisers said that personnel changes in government are immaterial without fundamental reforms. Mr Al Razzaz is a skilled administrator, well-versed in the challenges of debt-ridden countries. But whether he can win over those facing economic hardship while fulfilling Jordan’s significant obligations to the IMF is another matter.
Shrewd governments like Egypt’s have successfully revived their economies with the help of lenders. Austerity in Jordan must be coupled with strategic investment. Even if the contentious income tax law is withdrawn or amended, debt reduction targets will need to be met. Meanwhile, proponents of fundamental change are growing louder. They will want to see immediate action from Mr Al Razzaz in order to calm the streets of Jordan, traditionally a bastion of stability in a precarious region.