The Gulf states’ pledge of $2.5bn aid package to Jordan carries more symbolism and moral solidarity than offering a tangible solutions to the country’s economic crisis, several current and former Jordanian officials say.
Analysts say the aid package might only provide Jordan between an estimated $150-$300m of direct budget support each year over a five-year period, which falls too short of the Middle Eastern nation’s immediate needs to balance its budget.
A one-time payment between $500m-$1bn will go toward a direct deposit to Jordan’s Central Bank and the World Bank.
Hani al-Mulki was removed as prime minister after his efforts to reduce the budget deficit – which included income tax reforms and subsidy cuts – sparked widespread protests.
The latest aid package, however, appears to have disappointed Jordanian officials and public, who were hoping for at least double that amount, similar to the previous aid given by the Gulf nations between 2011-2017.
It carries more symbolic weight to Jordan than actual tangible economic solutions to its current crisis
Jawad Anani, a former Jordan deputy prime minister
Jawad Anani, a former Jordan deputy prime minister for economic affairs in the previous government, told Al Jazeera that the details about the aid package were “vague”.
“It carries more symbolic weight to Jordan than tangible economic solutions to its current crisis,” said Anani, who currently chairs Amman’s stock exchange.
The protesters continue to demand economic overhaul and policy changes to boost job creation and improve living standards.
‘State of flux’
The main point of the current Gulf aid package appears to be structured toward helping Jordan get more favourable loans from international lenders, something Jordan was hoping to avoid should the Gulf states offered the majority of their aid as a cash grant.
This arrangement, according to analysts, places the country in a state of flux because it does not address its immediate need of cash infusion to cover its budget deficit of over $1bn.
Under the 2011 agreement, Jordan received a $3.75bn from the three countries over a five-year period. It was also structured to pour cash directly into the economy to generate growth and revenues.
Jordan’s debt has now reached around $38bn and its debt-to-gross-domestic-product ratio is currently a record 96 percent up from 71 percent in 2011.
One of the major problems that bedevils Jordan’s finances is its payments to service its debt which in 2017 amounted to 21 percent of its total revenues or about $2bn, according to official figures.
Anani, the former deputy prime minister, said “it is still too early to say how the Gulf nations will decide to structure their pledges to Jordan, but nevertheless, the amount falls too short of Jordan’s expectations and immediate needs”.
For that reason Anani argues that, Jordan “must work with the European Union and other countries to bring capital investments to the country to create jobs and generate revenues for the state’s budget”.
The government should have reduced taxes and cut down on prices and fees to stimulate spending and generate growth
Senior Economist at Jordan’s ministry of finance
The three Gulf states of Saudi Arabia, Kuwait and the United Arab Emirates (UAE) pledged the total amount collectively, but it is still unclear the amount each country will pay, a critical detail for Jordan.
Analysts fear since the pledge was not a binding agreement it could be subjected to political pressures by the donor countries especially if there was a change in leadership their countries.
The absence of UAE crown prince and its de facto ruler Mohamad Bin Zayed from the meeting in Mecca, where the aid package was discussed, is also worrisome, according to senior Jordanian officials who spoke on condition of anonymity.
This could mean the UAE is probably less committed to help Jordan than other states at this critical juncture, according to Jordanian government sources.
Sheik Mohammad Bin Rashid al-Maktoum, the ruler of Dubai, represented the UAE at the meeting, which was attended by the heads of states of other two countries.
Upon his return from Saudi Arabia on Monday Jordan King Abdullah II expressed his “appreciation for Saudi Arabia, Kuwait and the UAE and Saudi King Salman Bin Abdel Aziz for their “brotherly Arab solidarity with Jordan”.
wrong Economic policy ?
A senior economist at Jordan’s ministry of finance told Al Jazeera that successive governments followed a wrong fiscal policy or “counter-cyclical” policy that focused on increased taxation and prices hikes to cover its uncontrolled expenditures”.
“This policy resulted in less consumer spending which in turn limited the growth of the economy,” said the official on the condition of anonymity because he was not authorised to speak to the media.
“The government should have used a procyclical approach by increasing government spending and reducing taxes to stimulate spending and generate growth,” he added.
Mohamad Halaiqah, a former deputy prime minister for economic affairs, told Al Jazeera that the Gulf aid while it does not help much to ease his country’s finances directly, it would, however help stabilise the country’s currency, the Dinar, and improve its credit worthiness to international lenders.
“At this stage, it’s better than nothing and we should use any help we can get,” he said.