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No Easy Way Out of Economic Strife for Jordan

Huge protests erupted in the Jordanian capital of Amman in late May of this year, continuing into June and culminating in the resignation of Prime Minister Hani al-Mulki. Over 300,000 Jordanians took to the streets to express their anger over proposed austerity measures that sought to increase taxes and end subsides on staples like fuel, bread and electricity. The Jordanian Hashemite monarchy, led by King Abdullah II, eventually bowed to the pressure and revoked the proposed reforms. Saudi Arabia, Kuwait and the UAE rushed to stabilize the situation, pledging US$2.5 billion in aid over the next five years.

While the immediate crisis may have subsided, the difficult economic crisis that backgrounds the events of this year remains, and it is unlikely that a solution will be forthcoming in the near future. Faced with a growing budget deficit, have reliance on foreign aid, rising public anger, disruptive external forces and no significant means of income generation with which to reclaim any economic independence, Jordan’s leaders must maneuver carefully and skillfully if they are to maintain stability.  

Jordan’s economic situation has been worsening for several years now. Government debt is increasing steadily, now sitting at US$40 billion, which is over 95% of the kingdom’s GDP.[1] While countries like Japan and the US have even higher debt to GDP ratios, what sets Jordan apart is that it has very limited means of income generation. Unlike most of its neighbors, Jordan lacks oil or other natural resources of significant value.

Years of rural assistance have alleviated poverty but also weakened agricultural systems of production. [2] Drought and border closure with neighboring Iraq and Syria, exports in Jordan have been a declining source of revenue since the start of the century, with growth having stagnated even further in recent years, averaging just 2.6% since 2011, as compared with a 6.6% average between 2005 and 2011.[3]

Unemployment is currently at around 18.2%,[4] meaning that a significant portion of the population is reliant on welfare. Goods such as fuel, power and bread are kept affordable by way of heavy government subsidization.   

Jordan’s economic woes have been compounded by the Syrian crisis, which saw the kingdom loose a valuable trading partner and an estimated 1.4 million refugees.[5] While the United Nations High Commissioner for Refugees (UNHRC) administers several camps within Jordan, only 10% of refugees fleeing Syria remain in these camps, meaning that the additional strain on Jordanian infrastructure and the job market has been enormous.[6]

Zaatari Refugee Camp, Jordan. Credit: Business Insider

Perceived insecurity following the outbreak of the Syrian Crisis, particularly after the emergence of ISIS in Syria and Iraq, is likely to explain the decline that has been experienced by Jordan’s tourism sector in recent years, which has further addled the kingdom’s already faltering economy.[7]

International aid to Jordan increased significantly following 2011[8], particularly in light of the number of refugees the country is hosting. However the protracted nature of the Syrian conflict as well as uncertainty surrounding the question of when and indeed if many refugees will be able to return to Syria means that there is the potential for this to become a long-term economic issue.

While the majority of the assistance offered by the international community came in the form of grants, some financial aid packages were loans, thus pushing the kingdom further into debt.[9]

The World Bank has stated that the sustained implementation of austerity reforms is the way forward for Jordan.[10] However the Jordanian people who took to the streets of Amman earlier this year tend to blame the government for the kingdom’s situation, claiming instead that fighting corruption and better economic planning the only ways to adequately address the crisis.[11]   

King Abdullah II speaks at the UN General Assembly. Credit: United Nations

Anti-corruption watchdogs have previously pointed to a level of public-sector corruption in Jordan,[12] but analysts have suggested that addressing corruption is unlikely to be a silver bullet to the kingdom’s crisis.[13]

However the popular perception that corruption and mismanagement are wholly to blame for the economic situation presents an additional challenge to the government in and of itself. Diverse demographics were represented in this latest round of protests. Public sector employees, business owners, residents from middle and upper-class neighborhoods took to the streets in May and June this year, a marked contrast to the predominately youth-led protests of 2011.[14] This suggests that public trust in the Jordanian government is in decline.

Even Tribal “East Bankers”, who have long constituted the political bedrock that supported the Hashemite monarchy, were also represented at the marches this year. Their presence demonstrates the continual erosion of traditionally taken-for-granted voting blocks, a trend that was first made obvious in the 2011 round of protests, when a coalition of more than 40 unions led by East-Bank Jordanians broke from tradition and expressed their dissatisfaction with the kingdom’s leadership.[15]  

The unraveling social contract in Jordan presents a serious problem to the Hashemite regime, not least of all because it makes attempting to address the economic crisis even more difficult. At the same time, the continuation of the current economic situation is likely to further contribute to public dissatisfaction with the regime.

Complicating matters even further is the fact that the patrons of foreign aid upon who Jordan depends for survival have shown themselves to be somewhat unreliable. When the five-year Gulf aid package to Jordan ended in 2017, Saudi Arabia decided not to renew it,[16] despite the fact that Jordan was still desperately in need of financial support.

Saudi Arabia and its Gulf allies rushed to stabilize the situation in Jordan following the outbreak of protests earlier this year, promising US$2.5 billion over the next five years.[17] However several uncomfortable points of difference between the two kingdoms remain, which have the potential to disrupt the flow of aid in the future. Jordan only half-heartedly participated in the Saudi-led Qatar blockade, and obstinately stands in the way of the Trump administration’s plan for Israel and Palestine – all positions that are out step with the increasingly aggressive stance being taken by Saudi Arabia and its Gulf allies. Some commentators speculated that Saudi Arabia’s failure to renew aid to Jordan in 2017 was an attempt to bully the latter into line after Jordan opted to downgrade it’s relations with Qatar but not sever ties altogether.[18]

There is nothing to stop Saudi Arabia, the UAE and Kuwait from reneging on their most recent aid package should Jordan continue to stay out of step with their foreign policy agendas. Jordan’s dire economic circumstances make it particularly vulnerable to such manipulation, although at the same time Saudi Arabia does have an interest in maintaining relative stability at its borders. 

Jordan’s position is difficult, and as such there is most likely no silver bullet when it comes to resolving the current economic crisis. Moving forward however, it would seem sensible for the government to make a sincere effort to address corruption in the public sector. While such an initiative would be unlikely to resolve the kingdom’s financial strife, it may help to restore public trust in the government, which could in turn make it easier for the government to address the economic crisis. Patrons of foreign aid such as the Gulf states could also help to stabilize the situation by offering long-term aid packages and by refraining from using aid as an instrument of political manipulation.

 

[1] Trading Economics, Jordan Government Debt and GDP, 2018: https://tradingeconomics.com/jordan/government-debt-to-gdp

[2] Sean L. Yom, Tribal Politics in Jordan: The Case of the Hirak Movement, The Middle East Journal, 68:2, 2014: 242.

[3] The World Bank, Sustaining Reforms and Expanding Export Revenues Crucial for Jordan’s Economic Stability, 2018: http://www.worldbank.org/en/news/press-release/2017/12/20/sustaining-reforms-and-expanding-export-revenues-crucial-for-jordans-economic-stability

[4] Oded Eran, Demonstration in Jordan: A Bonafide Threat to the Regime?, Institue for National Security Studies, 2017: http://www.inss.org.il/publication/demonstrations-jordan-bona-fide-threat-regime/

[5] Beatrix Immenkamp, Syrian Crisis: Impact on Jordan, European Parliamentary Research Service, 2017: 5.

[6] Ibid: 5.

[7] Ibid: 7.

[8] Ibid: 7.

[9] Ibid: 8.

[10] The World Bank, Sustaining Reforms and Expanding Export Revenues Crucial for Jordan’s Economic Stability, 2018: http://www.worldbank.org/en/news/press-release/2017/12/20/sustaining-reforms-and-expanding-export-revenues-crucial-for-jordans-economic-stability

[11] Al-Jazeera, Jordan Protests: What You Should Know, 2018: https://www.aljazeera.com/news/2018/06/jordan-protests-180604052840527.html

[12] The Jordanian Times, Jordan Ranks 57th out of 176 Countries in Public Sector Corruption, 2018: http://www.jordantimes.com/news/local/jordan-ranks-57th-out-176-countries-public-sector-corruption%E2%80%99

[13] Marwan Mwasher, End of the Rope, Carnegie Middle East Centre, 2018: http://carnegie-mec.org/diwan/76551?lang=en

[14] Marwan Mwasher, The End of the Rope, Carnegie Middle East Centre, 2018: http://carnegie-mec.org/diwan/76551?lang=en

[15] Sean L. Yom, Tribal Politics in Contemporary Jordan: The Case of the Hirak Movement, The Middle East Journal, 68:2, 2014.

[16] Noon Post, Are Salman and His Son Trying to Punish Jordan After the Gulf Crisis?, 2018: مقالات:هل يحاول سلمان وابنه معاقبة الأردن بعيد الأزمة الخليجية؟

[17] Farah Najjar, Jordan Protesters: Gulf Money Won’t Help, Al-Jazeera, 2018: https://www.aljazeera.com/news/2018/06/jordan-protesters-gulf-money-aid-package-180611114422748.html

[18] Noon Post, Are Salman and His Son Trying to Punish Jordan After the Gulf Crisis?, 2018: مقالات:هل يحاول سلمان وابنه معاقبة الأردن بعيد الأزمة الخليجية؟