Jordan’s king says $2.5bn aid package from Gulf allies will help defeat crisis
Jordan’s King Abdullah II said a pledge of $2.5 billion (Dh9.18bn) from Gulf allies would help his nation to overcome an economic crisis that led to more than a week of protests.
The aid from Saudi Arabia, the UAE and Kuwait was announced yesterday, and will be paid directly to Jordan’s Central Bank, with other financial guarantees.
King Abdullah and officials expressed their gratitude for the support, saying it had deepened “brotherly ties between Jordan and the Arab countries”.
The package includes budgetary backing for five years as well as finance for development projects. The support comes at a crucial time, yet economists and analysts said it would only be a temporary fix for Jordan’s moribund economy, plagued by spiralling public debt, a yawning budget deficit and unemployment at 18 per cent.
They said that the government will need to address public resentment over tax proposals that triggered this month’s demonstrations and forced Hani Mulki to resign as prime minister. Anything less, they said, would probably result in more protests.
New Prime Minister Omar Al Razzaz said he would withdraw the original bill. Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, led the UAE delegation to the meeting in Makkah. He tweeted that the meeting had served to “preserve stability and to strengthen the Arab and Islamic brotherhood”.
Thousands of Jordanians took to the streets in the largest protests since 2011, angered by austerity measures urged on the government by the International Monetary Fund.
The most divisive of those was a change to the income threshold for paying tax as well as higher taxes on companies and banks.
“The problem in Jordan is not just about foreign aid,” said Ahmed Awad, director of the Phenix Centre for Economic and Informatics Studies in Amman. “It is about the policies that have failed to create economic growth to create job opportunities. The government needs to review them and adopt a fair tax system, one that supports the industries rather than burdens them with taxes.
“But based on our past experiences, there is mismanagement of grants that should be geared to encouraging economic development.”
Jordan’s economy has been hit hard by regional crises that have undermined investor confidence, led to border closures and curbed exports. The erosion of foreign grants and a soaring number of Syrian refugees – more than 650,000 are registered with the UNHCR – and the interruption of gas supplies from Egypt contributed to an economic downturn.
Jordan’s debt has reached 96 per cent of GDP, up from 57 per cent in 2010. The budget deficit in the first quarter of this year was US$573.5 million, including grants. Last year’s deficit was almost $207m during the same period.
Growth in Jordan will increase from 2.3 per cent last year to 2.5 per cent in 2018, rising to 2.7 per cent next year, according to the IMF.
For decades, Jordan’s economy has relied heavily on foreign aid.
Mr Razzaz told the Alghad daily: “Jordan is under immense pressure to change its fixed positions.”
There is also increased anxiety that Jordan would have to offer concessions to the United States, notably over its stance on the Israeli-Palestinian conflict.
“The Gulf is also concerned about chaos in Jordan that will spill over to the region,” said Zaid Nawaiseh, a political analyst based in Amman.
Ali Abbous, head of Jordan’s professional associations, which called for the strikes and protests that unsettled the country last week, echoed those concerns.
“If there is unrest in Jordan, it will impact the entire region,” Mr Abbous said. “But Jordan cannot keep asking for money, Jordan needs to invest the aid in a manner that would benefit the economy.”
Gulf allies’ assistance to Jordan reflects concerns that unrest in the streets could spill across region and unsettle neighbours