Gulf states pledge $2.5b to support Jordan

Blanche Robertson
June 13, 2018

Jordan is pinning hopes on oil-rich Gulf states led by Saudi Arabia committing to a multi-billion dollar aid package to help it weather an economic crisis that sparked rare street protests over austerity plans, officials said.

Other monarchies are anxious that unrest in the United States ally could spill over across the region where other countries such as Bahrain and Egypt have been facing similar challenges.

Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister and Ruler of Dubai, has met with King Abdullah II of Jordan, at Al Diyafa Palace in Makkah, on the sidelines of the quartet meeting, to discuss means of supporting Jordan.

The rescue package comprises the bailout in the form of a deposit in the Jordanian Central Bank, World Bank guarantees, and budgetary support over five years.

Jordan, whose public debt almost equals economic output, has been hurt by the rise in global commodity prices.

Jordan is pushing fiscal consolidation measures required under an International Monetary Fund financing program including tax increases and subsidy cuts that have weighed on poorer and middle-class families.

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Jordan has been hit by mass protests in recent days over price hikes and a tax proposal created to bring down the country's debt level after securing a $723 million loan from the International Monetary Fund in 2016. These contacts ended with a decision to hold an urgent meeting in Mecca to consult on the crisis.

The move came a day after European Union foreign policy chief Federica Mogherini announced $23.5 million (20 million euros) in aid for Jordan following a wave of anti-austerity protests that led to the prime minister's resignation.

Jordan's newly designated prime minister, Omar al Razzaz, said on Thursday he would drop a proposed income tax bill, conceding to a key demand of protesters who had already brought down the previous government.

Cash-strapped Jordan, a close U.S. ally that relies heavily on donors, is struggling to curb its debt after securing a $723-million loan from the International Monetary Fund in 2016.

The World Bank says Jordan has "weak growth prospects" this year, while 18.5 percent of the working age population is unemployed.

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