In Light Of IMF Pressure And Diminishing Foreign Aid, Jordan Seeks To End Economic, Political Dependence On Its Allies

Introduction

In recent years, Jordan has been experiencing a grave and ongoing economic crisis that is steadily worsening due to the influx of Syrian refugees to the country and the diminishing of foreign aid. Jordanian King 'Abdallah addressed this in a June 4, 2018 meeting with journalists and newspaper editors, at which he said: "Jordan has been coping with unforeseen regional and economic circumstances, and there is no plan that can efficiently and rapidly meet this challenge. Jordan is currently at a crossroads: We can either overcome the crisis and provide our people with a dignified life, or, God forbid, head towards the unknown. We must know where we are headed. International aid to Jordan has decreased despite the fact that the kingdom has shouldered the burden of hosting the Syrian refugees. This is negligence on the part of the world."[1]

The wave of protests that swept Jordan in May 2018, which included large strikes and demonstrations throughout the kingdom, is not the first; in recent years such waves have been occurring in Jordan on a frequent basis in response to the extensive austerity measures taken by the Jordanian governments. These measures, which include the elimination of subsidies, as well as price hikes and tax hikes, are mandated by the International Monitory Fund (IMF) as a condition for extending aid to Jordan, and are also motivated by Jordan's own desire to end its years-long economic crisis.

In light of this crisis and the IMF pressure, and since the regular aid extended to Jordan by the Gulf countries, chiefly Saudi Arabia, has dwindled to almost nothing, Jordanian officials have begun discussing the need to attain economic self-sufficiency so as to end Jordan's dependence on foreign aid. Moreover, Jordan has concluded lately that its economic reliance on its allies – especially the U.S. and Saudi Arabia – limits its political freedom of action and compels it to endorse their political line even if it contravenes its own. This has been especially evident in the last year, in the context of Jordan's disagreements with the U.S. and Saudi Arabia over the Palestinian issue and the "Deal of the Century" that the Trump administration is said to be formulating with Saudi backing. In fact, when Jordan refused to toe the line it was hit with economic sanctions such as the halting of economic aid, or with threats to this effect. Jordan therefore feels that economic independence will lead to political independence as well, and this assumption is among the factors underpinning its current economic policy.

Indeed, on May 21, 2018 – even before the abating of the protest wave that began in January 2018 following price hikes and the elimination of the bread subsidy[2] – Hani Al-Mulki's government approved amendments to the income tax law intended to widen the circle of taxpayers and submitted them to the Parliament for ratification. This sparked the current wave of demonstrations, which, as mentioned, has included strikes and large demonstrations across the country. On May 31, the government's decision to raise gasoline and electricity prices intensified the protests even further, and a directive by the king to suspend the decision failed to quell them.[3] Mass protests took place every evening in various parts of the kingdom, some of them accompanied by rioting and the obstruction of traffic.[4] In demonstrations in front of the Prime Minister's office in Fourth Square in central Amman, protesters called for the resignation of Hani Al-Mulki and his ministers and tried to block access to the building, creating huge traffic jams.[5] Among the slogans chanted were "the people want to topple the government" and "Hani Al-Mulki is an enemy of Allah." On a few occasions there also was criticism of the king as responsible for the situation.[6] 

Cartoon in Jordanian daily: "The government" provokes the citizen by raising the price of gas (Al-Ghad, Jordan, June 1, 2018)

Eventually, on June 4, Al-Mulki and his ministers were compelled to resign, and the king appointed the education minister, 'Omar Al-Ghazzaz, as prime minister. The resignation of Al-Mulki and his government was apparently prompted by fears in Jordan of a new "Arab Spring" that would threaten the stability of the regime, as well as concerns that the protesters' demands would escalate to include demands for political reforms, as calls for such reforms were already being heard, especially from the Muslim Brotherhood.[7] However, even government's resignation did not put an end to the protests, which subsided only after the new prime minister announced, on June 7, that his government would pull the income tax draft law.

The recent protest wave also sparked concern in Saudi Arabia, Jordan's ally and neighbor, especially  in light of attempts by Saudi Arabia's rival, Qatar, to interfere in the Jordanian protests and to insinuate that Saudi Arabia was behind them due to its disagreements with Jordan about the Deal of the Century and also due to recent signs of rapprochement between Jordan and Qatar. It is apparently these concerns that led Saudi King Salman Bin 'Abd Al-'Aziz to convene a June 10 summit with the leaders of Jordan, Kuwait and the UAE, at which they announced a new $2.5 billion Gulf aid package for Jordan in a bid to stop the economic deterioration and the protests there.[8]  Qatar hurried to respond by pledging $500 million to Jordan in an aid package of its own. [9] 

The income tax draft law was in effect another attempt by the Jordanian regime to comply with the IMF demands and to implement economic reforms as a step towards a policy of economic independence. However, the protests it triggered were so intense that the regime, fearing for its stability, was forced to rescind it and to accept yet more aid from Saudi Arabia and the Gulf, contrary to its aspiration to attain economic self-reliance.

This report reviews the emerging shift in Jordan's economic policy – from reliance on foreign aid to a bid for self-sufficiency – and the circumstances that led to this shift.

Jordan Aspires To Self-Reliance – Not To Dependence On Allies – As The Way Out Of Its Economic Crisis

The king and regime officials explained and reiterated the rationale behind the concept of self-reliance to the citizens, stressing its importance despite its high cost to them.

King Abdullah: No One Will Help Us If We Don't Do It Ourselves

On the self-reliance concept as an end to the economic crisis, King Abdullah stressed, in a September 2017 interview with the official Jordanian news agency Petra, that a central pillar of encouraging economic growth and strengthening the Jordanian economy was a gradual reduction in dependence on foreign aid and an increasing reliance on Jordanian capabilities. He said: "I am aware of the scope of the suffering experienced by Jordan's citizens due to the economic challenges, and of the weight of the responsibility on our country [to resolve them]. But the reality, that all of us must understand, is that no one will help us if we do not first help ourselves. Ultimately, we must rely on ourselves."[10] He has made similar statements on various occasions since.

King Abdullah opening the parliamentary session, November 12, 2017 (Source: Al-Ghad, November 13, 2017) 

Former Information Minister: The Change Is Difficult But Is Bound To Pay Off

In an article published November 1, 2017 in the Al-Rai government daily, former Jordanian information minister Nabil Al-Sharif defended the economic policy shift despite the difficulties it caused, and called for reshaping the national consciousness to facilitate it. He wrote:

"There is a consensus among political and economic commentators that we have in effect entered a new era in our economic policy, named, as the king said, self-reliance. This is because the aid from our [Arab] brothers, that would come directly [to the state budget], stopped years ago...

"This is a difficult change, but in the end we are bound to say that our suffering was worth it – because the nature of things is that people and countries rely on themselves, and any reliance on others is unusual... We must act to replace the culture of dependence on others that has prevailed [in Jordan] for a long time with a new culture based on self-reliance; this is the only way to develop and advance in life...

"The transition from [one] collective culture to another requires hard work, and even a comprehensive national plan, that is based on rebuilding the national values system on new foundations. For this system, we must mobilize all the apparatuses that shape public opinion, and focus their efforts to recreate the national consciousness – starting with the [school] curricula, the religious sermons, the media messages, and so on."[11] 

Former Foreign Minister: Saudi Arabia Is Not Our Bulwark As It Once Was; We Must Rely On Ourselves

Domestic changes in the countries that are Jordan's allies also contributed to the realization that Jordan could not continue to rely on economic aid. In Saudi Arabia, which was for years a major contributor to the Jordanian economy, fundamental changes are in progress: Crown Prince Mohammed bin Salman announced the Saudi Vision 2030 plan, under which he is instituting many reforms in the country, and it appears that he is advancing a policy of streamlining and developing the domestic Saudi economy and reducing expenditures outside the country – including foreign aid to Jordan.

In his November 15, 2017 column in the Al-Ghad daily, former Jordanian foreign minister Marwan Al-Mu'asher called for internalizing Saudi Arabia's new situation and acting to achieve economic independence. He wrote: "It is clear that Saudi Arabia today is no longer the Saudi Arabia that we knew, and that it is continuing to energetically implement far-reaching steps [at home]... How is this impacting Jordan? Politically, Jordan-Saudi relations are not determined based on the same considerations they once were, although the political positions in regional and international matters remain largely coordinated, even if they are not identical. Due to the drop in oil prices, Saudi Arabia has not renewed its oil grant [to Jordan] and has not supported the [Jordanian] state exchequer for over two years – and there is no sign that it will do so in the future... Today, it is clear that we must rely only on ourselves, as the king said in his speech at the opening of the parliamentary session..."[12]

Economic Independence Will Lead To Political Independence, Which Jordan Sorely Lacks

As stated, Jordan's grave economic situation and dependence on foreign aid sometimes compel it to conform, against its will, to the policies and positions of its allies that provide it with aid. This has caused difficulty for Jordan, especially recently, since its allies – chiefly the U.S. and Saudi Arabia – have taken measures that contravene its position.

Jordan Threatened With Losing American, Saudi Aid Due To Political Disagreements With Them

Recently there have been increasing reports about disagreements between Jordan and its main allies, Saudi Arabia and the U.S., regarding several political issues concerning the region.[13] A major issue of contention is the Palestinian one, following the Trump administration's recognition of Jerusalem as the capital of Israel and following reports in the Western and Arab media that the two countries have been collaborating in the drafting of Trump's Deal of the Century for resolving the Israeli-Palestinian conflict,[14] which Jordan fears will infringe on its interests.

The U.S. administration's decision, in December 2017, to recognize Jerusalem as Israel's capital and move the U.S. embassy there was met with firm opposition from numerous countries, including Jordan. Egypt submitted a UN Security Council resolution demanding to reverse the decision, and after the U.S. vetoed it, the draft resolution was put to a vote in the UN General Assembly. On the eve of the vote, President Trump threatened to cut off American aid to any country that supported the resolution, but Jordan – which has a special status vis-à-vis Jerusalem, recognized in its peace agreement with Israel and in an agreement with the PA[15] – nevertheless decided to vote in favor of it. This decision sparked grave concerns in the kingdom, reflected in numerous articles in the Jordanian press discussing what would happen if the U.S. indeed cut off its economic aid to Jordan. For example, Jumana Ghunaimat, who was editor of the Al-Ghad daily at the time, wrote: "What preoccupies Jordanians today is the situation of their country in light of the American threat to withhold its grants after Jordan voted in favor of [the UN resolution on] Jerusalem, and what might happen if Uncle Sam actually does this... The worst case scenario is that Trump actually realizes this threat, which will exacerbate the existing economic crisis [in Jordan], since Washington grants Amman over $1.2 billion [annually], $475 million of which goes to direct budget support and is included in the Budget Law, while the rest is transferred to the security [apparatuses] or to development projects through... the American development agency USAID. The U.S. also provides loan guarantees for Jordan. It is [therefore] certain that if [Trump's threat] is realized, our economic hardship will increase..."[16]

The fears were allayed when on February 14, 2018, during a visit to Jordan by then-U.S. secretary of state Rex Tillerson, the two countries signed a memorandum of understandings in which the U.S. pledged $6.375 billion in economic and military aid to Jordan for five years.[17] Nevertheless, the U.S. threats and the fears they sparked cemented Jordan's conviction about the need to end its economic reliance on the U.S. and other countries.

Jordan's relations with Saudi Arabia have likewise seen ups and downs in recent years. In the last year there have been increasing reports about disagreements between the two countries, especially over the Palestinian issue. This is due to Saudi Arabia's policy on the Israeli-Palestinian conflict – which is seen as conforming to an American policy that favors Israel over the Palestinians – and following reports that Saudi Arabia is involved in the formulation of the Deal of the Century that, it is said, could harm Jordan's status in the region or even threaten its stability. Complaints about the Saudi conduct have been frequently heard in the kingdom in the recent months. For example, according to some reports, during demonstrations in Amman against Trump's December 2017 Jerusalem decision, protesters called the Saudi crown prince an "American agent." More evidence for the tension was the harsh exchange between the Saudi ambassador to Amman, Prince Khalid Bin Faisal Al-Sa'ud Bin Turki, and Jordanian MPs who denounced the warning issued by the Saudi embassy to its nationals in Jordan to keep their distance from these anti-U.S. demonstrations "out of concern for their safety." Also, a few articles in the government daily Al-Rai implicitly criticized the Saudi moves, which they said could undermine Jordan's sovereignty in Jerusalem and the right of return, and denounced Saudi Arabia for seeking to make a deal behind the Palestinians' backs. One article condemned "certain political novices" – referring to the Saudi crown prince – "who have begun speaking in the name of the entire ummah, and especially in the name of the Palestinians, about relinquishing parts of Palestine, including Jerusalem, and even proposing a Palestinian capital other than Jerusalem."[18]

A further indication of the tension is Jordan's rapprochement with Turkey, which in the past few years has become a rival of Saudi Arabia. The Jordanian king's presence at the December 13, 2017 emergency summit of the Organization of Islamic Cooperation (OIC) in Istanbul, initiated by Erdogan following Trump's Jerusalem announcement, enraged the Saudis, who were represented at the summit by a low-level delegation. Saudi Arabia was similarly enraged when the king attended another summit organized by Erdogan, on May 18, 2018, following the transfer of the U.S. embassy to Jerusalem and the events of the March of Return in Gaza. This too was seen by the Saudis as a Jordanian act of defiance against them.[19]

Jordanian officials explicitly acknowledged that the political disagreements with their two foremost allies – the U.S. and Saudi Arabia – had led to political pressure on Jordan and even to punitive economic sanctions against it. King 'Abdallah himself said in December 2017 in a meeting with students: "Some of the economic difficulties the kingdom is coping with stem from pressures in response to its political positions. We received messages [conveying]: 'Conform to our [position] on Jerusalem and we will make things easier for you.'"[20]

Mamdouh Al-'Abadi, who was a senior minister in the Jordanian government at the time, likewise hinted that the economic aid to Jordan had been suspended in response to the kingdom's political positions. In a meeting with farmers and agriculture sector leaders, who were protesting the imposing of new taxes on the sector, Al-'Abadi said: "You all know that Jordan is paying a price for its national position on Jerusalem. Last year and the year before that, our brother [i.e., Saudi Arabia] stopped helping us even before our friend did, but we could never relinquish Jerusalem and the Hashemite custodianship over it."[21]

Articles In Jordanian Press: Economic Dependence, Which Leads To Political Dependence, Must Stop

The conviction that Jordan must free itself from economic dependence, and thus also from political dependence, was reflected in the Jordanian press as well. In an article she wrote after Trump's recognition of Jerusalem as Israel's capital, then-Al-Ghad editor Jumana Ghunaimat wrote: "Jordan's stance [on the U.S. decision] is a brave one, [taken] despite the limited options and room for maneuvering available to this country, which depends on taxes and foreign aid for its budget... We must realize that nobody will defend Jordan from the dangers that Trump's decision [may bring], and that we must reconsider [certain] alliances that do not defend Jordan's interests... [Our] current alliances do not defend Jordan's strategic interests, but only provide [us] with painkillers. The principle of self-reliance is not confined to the economic level; in the current circumstances it is more important that we rely on ourselves on the political level as well."[22]

In the article she published after Jordan voted against the U.S. in the UN General Assembly, Ghunaimat said: "The decline in foreign aid did not start with Trump's threat to stop [his country's contributions], but when the Arabs turned their backs on Jordan and refrained from granting it aid in the last few years, even though these years were difficult and full of challenges. The last aid [pledged to us] was a grant from Gulf Cooperation Council [countries], intended to help Jordan during the Arab Spring, most of which was [indeed] paid over, except for the sum [pledged by] Qatar...

"The essential point is that Trump's threat [to cut off aid to Jordan] and the suspension of Arab aid leave Jordan isolated, not only politically but also economically. This certainly mandates a reassessment of the situation, so as to eliminate the Western and Arab threats and begin the journey towards self-reliance, whether Trump cuts off the aid or not."[23]  

Muhammad Abu Rumman, a researcher at the Center for Strategic Studies at the University of Jordan, wrote in his December 18, 2017 column in Al-Ghad: "We are divided with [our Arab] allies on almost every aspect of foreign policy... Furthermore, Trump's latest decision [on Jerusalem] and the Jordanian reaction to it created tension with the [U.S.] president as well... It is important and even vital that the Jordanian public understand these serious facts, for Jordan's political positions come at a price, and that is what we are seeing  today: foreign aid is tapering off and is [now] confined to the familiar and traditional U.S. aid, while Jordan is suffering a severe financial and economic crisis. [But] the [Jordanian] decision makers are not [even] considering trading Jordan's positions on Jerusalem and other regional issues for financial aid. This means that we must rely on ourselves, which puts us completely at the mercy of the IMF..."[24]

Another article which drew a connection between the kingdom's economic independence and its political independence and directed implicit criticism at Saudi Arabia was the May 24, 2018 editorial of the daily Al-Dustour, published ahead of Jordan's Independence Day. Titled "Independence – The Path to Self-Reliance," the editorial said: "One of the challenges we face, [all of] which require an understanding of the power-balance in the region, is the economic challenge. It seems that we must increase our self-reliance, for our former friend [i.e., Saudi Arabia] is now more like an observer, and our former ally has now been tempted to [swallow] illusions and relinquish the dreams of generations [of Palestinians] who waited and yearned for freedom in Palestine..."[25]

The Recent Protest Wave – Sparked By Jordan's Latest Failed Effort To Advance Towards Self-Reliance

The income tax draft law that sparked the latest wave of protests in Jordan – meant to widen the circle of taxpayers and thereby increase the state's revenue from taxes – was part of the Jordanian government's efforts to strengthen the economy and advance towards economic self-reliance. Indeed, statements by Jordanian official stressed the vital need for economic and political independence. Immediately after the government's approval of the draft law, Jordanian government spokesman Muhammad Al-Mumani emphasized, at a joint press conference with finance minister 'Omar Malhas, that the draft law was "part of a comprehensive economic and financial reform... adopted by the government in order to attain the clear and stated objective of self-reliance that will allow us to build a strong and sturdy economy... and will bolster our political decisions." He added: "The pressures to which Jordan is subjected are unendurable, and stem from its honorable positions on regional matters. Our economic resilience is a major component of our political resilience, and we adhere to our positions, which are based on our principles, our values and our past."[26]

Protest in central Amman in front of the Prime Minister's office (image: Twitter.com/lolomt93_alaa, June 4, 2018)

In an attempt to quell the protests, the king reiterated, at a June 2, 2018 National Policies Council meeting he chaired, that the purpose of the reform was to attain self-sufficiency, but stressed that it would also result in the improvement of government services. He said: "It would not be fair [to expect] the citizen alone to bear the burden of the economic reform measures... Self-reliance is not just a slogan and does not only mean [more] taxes. It also means efficient government apparatuses that can dispense high-quality services [to the citizen], attract investments, and enable the local and municipal councils to improve development and services... I am well aware that our people have suffered greatly and have displayed great perseverance. Such is the noble character of the Jordanians, and we are toiling day and night to overcome this difficult situation..."[27]

The recently resigned prime minister, Hani Al-Mulki, also emphasized during the protest wave that "the government [means to] seriously address the economic challenges in a way that will lay the foundations for a  new phase of self-reliance and enable to overcome the severe economic situation..." [28]

But, as stated, in light of the increasing protests and the fear that they would get out of hand, the government and its head eventually resigned and the new prime minister announced the suspension of the income tax draft law. It should be noted that government dismissals and reshuffles have become a recurring phenomenon in Jordan in the last few years, usually carried out to quell protests over government policies, especially economic ones.[29]

The extensive protests also prompted Saudi Arabia and other Gulf states to renew their aid to Jordan. As mentioned, at a June 10 summit, the leaders of Saudi Arabia, Jordan, Kuwait and the UAE pledged $2.5 billion to the kingdom.[30] Saudi Arabia, who had suspended aid to Jordan for a long period of time, was apparently motivated by fear that the protests would destabilize its ally Jordan, and perhaps also by hints and threats that, in the absence of Saudi aid, Jordan would be forced to seek help from countries hostile to Saudi Arabia, such as Qatar and Iran.[31]

Commentator 'Abd Al-Bari 'Atwan, editor of the e-daily Rai Al-Yawm, expressed a different opinion. He wrote that the renewal of the Gulf aid to Jordan at this time was motivated, inter alia, by "[Saudi] concerns that Jordan would develop a policy of economic self-reliance and adopt plans that would render unnecessary the aid of the Gulf countries, especially that of Saudi Arabia and the UAE – which would strengthen Jordan's independent decision making and end its previous subordination [to the Gulf]."[32]

In conclusion, it appears that the Jordanian regime finds itself in a very difficult situation at this time: it seeks to forgo foreign aid and develop a robust and self-sufficient economy, but any attempt to advance the necessary economic reforms provokes popular protests that threaten its stability and drive it to accept more foreign aid. Nevertheless, the regime has not given up on this objective. This is evident from statements by the new prime minister, 'Omar Al-Ghazzaz, who said on June 11, during consultations ahead of forming his government, that "the path towards self-reliance will be the watchword of the coming period."[33] This path, however, is bound to be difficult and fraught with danger.

 

*Z. Harel is a research fellow at MEMRI; H. Varulkar is Director of Research at MEMRI.