The economic crisis in Jordan has forced the country’s government to raise taxes on food that dominantly composes a standard diet for Jordanians, such as bread. The tax rise would allow the government to close the gap of $700 million budget deficit. Moreover, this year, the country will undergo another massive economic change caused by the failure of financial assistance renewal from Jordan’s Gulf Cooperation Council allies.
However, the United States has agreed to provide financial aid to Jordan. U.S. Secretary of State Rex Tillerson during his official visit to the country on Wednesday, February 14th, signed a five-year deal that will provide Jordan with more than 6 billion U.S. dollars in aid. Shortly, the Department of State released a statement explaining how the money will be distributed to support the country’s economic and military sectors.
The main concern of a number of analysts is that the deal will only serve American interests and will exclude those who struggle the most: poor and middle class. Besides, the constant flow of foreign aid to the country has created the financial dependency of Jordan’s economy and inability to enhance its economic performance. Analysts worry that the current economic crisis in Jordan could lead to a violent revolt against the central government.
Jordan’s economic crisis threatens political stability
Angry at the decision to increase food prices last month, restive Jordanians are demanding the government’s resignation and the dissolution of parliament.
Last month, the government implemented a tax rise of between 50-100 percent on key food staples such as bread, in order to decrease its $700m budget deficit.
Jordan’s debt has now reached $40bn and its debt-to-gross-domestic-product ratio has reached a record 95 percent, up from 71 percent in 2011.
The economic crunch that squeezes the country will be particularly acute this year, after Jordan’s Gulf Cooperation Council (GCC) allies – Saudi Arabia, UAE, and Kuwait – did not renew a five-year financial assistance programme with Amman worth $3.6bn that ended in 2017.
The United States is now the only donor that has committed itself to support Jordan. On Wednesday, US Secretary of State Rex Tillerson signed a five-year $6.375bn ($1.275bn a year) aid deal with Foreign Minister Ayman al-Safadi.
This surpassed the previous agreement of about $1bn a year, signed with the previous US administration, by about 27 percent, and increased in length from three years to five.
A US State Department statement said $750m was earmarked annually for economic support funds and $350m for the military. It was unclear what the remaining $175m would be used for.
“As part of this bilateral understanding, Jordan has committed to prioritise economic and security sector reforms that aim to support Jordanian self-reliance,” it said.
During a joint press conference in Amman, Tillerson said the increase would support Jordan’s security roles in fighting terrorism and the conflict in Syria.
However, even with the increased flow of US aid that has funded budgets and projects since the 1950s, it remains to be seen if Jordan’s economy will stabilise, according to analysts.
Hussam Abdallat, a political activist and former government official, told Al Jazeera the American assistance won’t benefit ordinary Jordanians.
“American aid to Jordan is useless to the average Jordanian; most of it goes to support the Jordanian military – which serves American interests, not Jordan’s – and the rest goes back to the US through US companies working in Jordan,” Abdallat said.
Any US aid that is not directly budgeted for economic development is “meaningless”, he added.
Journalist Salameh Aldarawi, editor of Maqar online newspaper, told Al Jazeera that Jordan’s economic problems are directly related to political stability in the region.
Aldarawi, who writes on the Jordanian economy, said devastating wars in neighbouring Syria and Iraq – the country’s biggest trading partners – have curtailed economic growth.
The harsh measures taken by the government will not improve economic stability and will only hurt the most vulnerable people in Jordanian society, he said.
“Prices and tax hikes are only hurting the poor and the middle class, especially in the absence of wage increases or social safety nets,” Aldarawi said. “These measures will only provide temporary quick fixes, not a long-term, strategic solution.”
He said tackling corruption was imperative, along with fixing the “collapsed education and healthcare systems.
“The government must start with fighting entrenched and endemic corruption within its ranks, recover billions of dollars of embezzled public funds, [and] create equality among the different segments of the population, especially towards those who pay more taxes but get fewer services and privileges,” said Aldarawi.
Abdallat, who leads several activist groups demanding political and economic reform, said Jordan’s political elite must be held accountable for their actions that have driven the country to the edge of financial ruin.
“People are protesting in several areas in the country and demanding the resignation of the government and the parliament, who are responsible for the economic disaster we are in now,” he said.
In Amman, where nearly half of Jordan’s 9.9 million population resides, criticism of government policies has spread over social media, but, so far, not significantly to the streets.
Analysts say that, unlike residents of the capital, people in the southern and northern provinces are more dependent on government largesse and employment and will suffer greater hardship when the government is no longer able to meet their needs.
“At this rate, I am afraid that we will end up with a revolt of the hungry,” said Abdallat.
Hussein Mahadeen, a professor of social development at Mutah University in Kerak, south of Amman, said Jordan has a foreign aid dependency problem because of its political and social structure.
Mahadeen said Jordan is still transitioning from its tribal society roots into a semi-modern state.
“Lacking solid legal and civic institutions, to safeguard the rights and liberties of citizens and their ability to contest government decisions, is a major impediment towards its political and economic development,” he told Al Jazeera.
“The Jordanian society, for several reasons, is not mature enough socially and politically to be able to mount a serious challenge to the state’s ability to impose strict economic measures.”
For many decades, foreign aid and remittances from expatriate Jordanians in the Gulf region were the mainstays of the Jordanian economy that kept the country afloat.
This, however, created dependency, and a succession of Jordanian governments failed to take measures to wean the country off foreign assistance and become self-reliant, according to Mahadeen.
Jordan’s main problem is it hasn’t progressed and developed beyond its “functional state” roots, that is a state created to perform certain functions on behalf of others, after its creation by the British, after defeating the Ottoman Empire in World War I, he said
Abdallat – who has been imprisoned several times for his criticism of the government – said he was concerned the economic situation facing Jordan could result in an uprising.
“If the current economic crisis persists, it might lead to a revolt, and I am afraid it will be a violent one,” he said.
Source: Al Jazeera, Ali Younes, Feb 14, 2018. Photo credit to Muhammad Hamed/Reuters .