Jordan faces its historical reckoning

The streets of Amman today appear calm and everyone seems to be going about their business as usual. But just two months ago, the country faced massive protests which mirrored others it had seen before. The script of the May-June events developed along the usual lines: public protests over price increases made the king dismiss the government, freeze price increases, name a new prime minister, and ask for fresh reforms.

For the past 40 years, such events have recurred regularly, while Jordan’s major problems remained the same: corruption, unemployment, poverty, poor government services, and increasingly difficult living conditions for middle and lower-income Jordanians who make up the majority of the population.

In that time, the state adjusted its fiscal policies to accommodate growing public spending. It reduced subsidies and raised taxes and fees, which the citizenry grudgingly accepted, even after short-lived protests. This time, though, the situation is very different, and the same old government response will not work, because the scale, depth, and consequences of Jordan’s economic stresses are unprecedented.

The May-June events represent a broad-based, nationwide popular tax rebellion that, unlike past demonstrations, brought together all sectors of society — poor and middle-income people, professionals and private businesspeople, men and women, young and old, rural and urban folk, and Jordanians of all ethnic and geographic origins.

After former Prime Minister Hani Mulki had proposed in early May reforms to address a multiyear economic adjustment plan agreed with the International Monetary Fund (IMF) and other donors, it became clear that the government had pushed past the limit of what citizens could bear financially or accept politically.

Jordanians are and feel poor after years of gradual austerity, according to the soon-to-be-published 2016 data from the Arab Barometer survey. This shows that only 35 percent of Jordanians can meet their families’ needs without difficulty, while 64 percent face difficulty or cannot meet their expenses. At the same time, the state has exhausted existing ways to raise enough revenue to cover its core current expenses of salaries and loan interest payments.

The Mulki government had to increase taxes for 2019 because the country faced bankruptcy if no extra income were found to bolster state coffers. This reflected Jordan’s tighter situation the past few years when it could not easily obtain the high levels of foreign grants, loans, and guarantees that it had secured over previous decades.

Yet the state’s recent fiscal performance has been impressive in many ways. Between 2012 and 2017, according to IMF data and interviews with several former officials who dealt with these issues, domestic income from taxes and fees increased from covering 67 to 95 percent of current expenditures (this covers loan interest payments, but does not cover loan principal repayments, which annually require billions of grant dollars).

The May tax measures and price rises aimed to close that last five percent gap, and set Jordan on a sustainable growth path that would see new jobs created and incomes increase – or so the theory of economic adjustment said. But the theory did not account for falling standards of living, recent slowing down of economic growth, and rising expenses which have brought the general population to the brink.

The Jordanian people made it clear that they refuse to accept more austerity, when they feel they have no say in political decisions, corruption remains unchecked, and the political elite continues to enrich itself.

How to introduce meaningful changes The new Jordanian government must respond with simultaneous meaningful changes in four areas: expand real citizen participation in the top-heavy political system, jolt the weak economy onto a growth path, reduce polarisation between rich and poor, and reduce the chronic need for large-scale foreign aid grants (which is the basic aim of the IMF plan that is being implemented).

New Prime Minister Omar al-Razzaz’ government got the message. In its policy statement it promised the parliament to act in its first 100 days on a wide range of issues, including corruption, a national dialogue on “tax justice”, improving health, water, transport, and other public services, and opening direct electronic communication channels with citizens.

The $3bn emergency aid that came into the treasury this summer gives Razzaz some breathing space to formulate new policies that bridge the massive gap between the state’s fiscal needs and the citizens’ demand for political dignity and material well-being.

One of his biggest challenges is citizens’ large distrust in his government and the system, in general. Recent polls by the respected local NAMA Consultants and the University of Jordan Strategic Studies Center indicate a steady decline in how citizens view the government’s track record in serving the people — from around 65 percent in 2011 to just 35 percent today. Equally troubling are Arab Barometer findings that a large majority, 79 percent, feel that corruption exists in state institutions, and the two biggest concerns of Jordanians are the economy and corruption.

The demonstrators from all walks of life took to the streets because they all felt that none of these issues were being equitably addressed in the Mulki government proposals. Rebuilding citizen trust in political institutions will require both economic and political measures in a genuinely consultative context, rather than the usual top-down edicts from the government or benevolent gestures from the monarchy.

What would ordinary citizens see as signs of success that promise to improve their lives? These could include a more egalitarian tax law, social services improvements, more serious anti-corruption measures, and genuine citizen-state consultations that reduce the pervasive polarisation and marginalisation that are among Jordan’s biggest threats today.

The Razzaz government must do this while it reduces the state’s steep fiscal pressures. For example, the national debt-to-GDP ratio has risen in recent years to 95 percent, instead of declining, but should start to drop in 2019, according to the IMF. The economy has slowed to just two percent average annual growth, which is below the population growth rate. Citizens who already suffer low living standards cannot withstand more chunks of their low incomes being grabbed by new taxes (85 percent of Jordanians make less than $720 per month, according to existing wage labour data at state institutions).

Only about five percent of Jordanians pay income tax, which the economic adjustment programme aims to increase to 11 percent, while also lowering the thresh-hold for tax exemptions. The Mulki measures announced in May would have increased the financial burden on most Jordanians, due to the combined tax increases, lower taxable thresh-holds, less tax evasion, higher indirect taxes, fewer subsidies, and other related measures.

Because nearly 80 percent of the state budget covers salaries, pensions, and debt service payments, and about half of all employed citizens depend on the state for their wages and pensions, the state has little room to lower expenditures. The agreed government-IMF programme anticipates the need to raise nearly $2bn every year in foreign loans or grants to cover repayment of debt principal, which requires huge Arab and international aid that is often exacerbated by current political conditions in the region.

This is the most serious challenge of King Abdullah’s reign, because along with the domestic economic/political stresses, several senior analysts and former officials said in interviews, it might include a controversial new foreign policy twist: In return for long-term cash-aid, Saudi Arabia and the US might pressure a vulnerable Jordan to join their “deal of the century” proposal on Palestine-Israel, which Jordan has resisted to date.

The king has not indicated how he plans to reconcile these conflicting demands, beyond broad generalities in his letter appointing Razzaz. The demands of his restless citizens include political reforms based on genuine participation and accountability, which have been rare in the entire Arab region’s recent history.

Jordan is not moving towards a constitutional monarchy — this is not a serious populist demand, in any case — but neither can it continue doing business as usual. Forced by the circumstances of its difficult external shocks in energy imports, war-closed borders, lower transit trade, and erratic Arab budget support, along with its own domestic political and economic mismanagement, Jordan must soon indicate its direction. Will it boldly make the structural political and economic changes its citizens seem to seek, but that all other Arab states have furiously resisted? Or will it remain hobbled in the shaky authoritarian bargain of the corruption-riddled rentier states that dot the Arab landscape?

Decisions made in the coming six months will be crucial to the future of Jordan, and perhaps a sign of the future of other Arab states.

Rami G Khouri is a senior public policy fellow and journalism professor at the American University of Beirut. This article originated at Al Jazeera.com