- Thousands have taken to the streets throughout Jordan in protest of a new income tax bill
- The law is just one of several austerity measures backed the IMF
- Jordan is woefully dependent on the IMF for loans
- The protests may not be able to change Jordan's relationship to the IMF
By Ty Joplin
“The government is a thief,” protesters chanted as they pushed back lines of security and army personnel in Amman. Demanding the fall of the government, thousands turned out to the fourth day of demonstrations against austerity measures that will raise the cost of living in Jordan.
So far, many of the austerity measures implemented since 2016 have done little to improve the lives of Jordanians or alleviate the country’s growing debt.
But the protests against the measures will likely have little impact, as the cash-poor Jordan has become a rentier state, dependent upon loans, grants and outside investment with little power in determining its own fiscal policies.
Sunday, June 3rd was the real test to determine the staying power of the demonstrations since many had to return to work the next morning. In the waves of protesters, families drank tea and coffee and smoked shisha on the sidewalk. Young Jordanian men shoved the lines of security personnel back, but there was an implicit understanding that the protests would not escalate into outright violence.
Most security personnel were unarmed and ill-equipped to handle a riot, save only a few dozen armed guards lurking quietly near the Prime Minister’s palace if the demonstrations got out of hand.
But in other parts of Jordan, violent protests have broken out. In Ma’an, an historically restive city in central Jordan, protesters reportedly burned tires on roads to block police from coming near. Other cities such as Zarqa and Karak also saw large demonstrations.
The demonstrations began on Wednesday, May 30 when over two dozen trade unions called for a strike against a proposed tax bill. The bill in question would raise taxes on individuals making over 8,000 Jordanian Dinar ($11,275) and families making over 16,000 JD ($22,550).
The Prime Minister, who has been the central target of the demonstrations, has signalled that he will defer to the Parliament’s vote to determine the bill’s future. A majority of Jordan’s parliament have said they will strike the bill down. But the demonstrations go beyond this particular tax bill.
The day after the Wednesday protests, the government announced it would increase the price of electricity and fuel, which expanded the protests dramatically. They have since snowballed into a demand from Jordan’s middle class to stave the country’s rising living costs.
Jordan’s Precarious Middle Class and the IMF
Jordanian protesters shout slogans and raise a national flag during a demonstration outside the Prime Minister's office in the capital Amman late on June 2, 2018. (Khalil MAZRAAWI/AFP)
Since the 2011 Arab Spring hit the region and destabilized nearly every neighboring country, Jordan has taken in millions of refugees, transforming itself into a rentier state, dependent upon international aid grants and loans from the likes of USAID, the International Monetary Fund (IMF), and the United Nations (U.N.).
The steady intake of refugees has strained the resources of the Jordanian state and driven it more deeply into debt. In 2010, Jordan’s debt represented 67% of its GDP. Now, it’s almost 96%. Jordan is running out of money, and with a GDP of just about $39 billion, it has little wiggle room to stimulate itself.
The biggest shaper of Jordan’s monetary policy and thus its relationship to its people is the IMF, who in 2016 agreed to give Jordan a massive loan of $723 million on the condition that Jordan implement a series of austerity measures including the removal of wheat and fuel subsidies and increasing taxes. The loan is being doled out in parcels over the next few years; the IMF hopes to reduce the size of Jordan’s debt to 77% of its GDP.
So far, the austerity measures of pushed Jordan deeper into stagnation, strangling its middle class and increasing its debt, making it even more reliant on the IMF for help.
“Living conditions have deteriorated” since the government began implementing IMF reforms, said Dr. Ahmad Awad, director of the Amman-based Phenix Center for Economic and Informatics Studies.
Jordanian protesters shout slogans before members of the gendarmerie and security forces during a demonstration outside the Prime Minister's office in the capital Amman late on June 2, 2018 (Kahlil MAZRAAWI/AFP)
According to him, thanks in part to the IMF’s austerity measures, unemployment has increased, 80,000 more people are in need of social welfare from the state, meaning poverty is on the rise, and budget deficits have increased. Total unemployment officially stands at 15% while youth unemployment is hovering around 40%.
While Dr. Awad agrees with the notion that tax reform is needed in Jordan to help generate revenue to the state, the government has consistently mis-implemented monetary policies to the detriment of the people. Rather than proposing a progressive income tax as Dr. Awad and the IMF pushed Jordan to do, the government instead pushed an upward tax for everyone making over 8,000 JD and a flat tax on those making over 34,000 JD meaning the tax burden falls disproportionately on the middle class.
In early 2018, Jordan cut subsidies to fuel and wheat on behalf of the IMF recommendations for the loan, driving hundreds of farmers to protest throughout Jordan and outside Parliament. At the same, protesters in Tunisia and Sudan showed up in droves against the same IMF-backed austerity measures being implemented by their respective governments.
When asked who is to blame, Dr. Awad said both the IMF and the Jordanian government is to blame for the unrest currently unfolding.
Limited Prospects for an Uncertain Future
Protesters raise their fists near riot police officers during a demonstration outside the prime minister's office in the capital Amman late on June 3, 2018. (Khalil MAZRAAWI/AFP)
In the face of a rising cost of living, stagnating wages, rising unemployment and a growing reliance on institutions like the IMF, which back austerity measures that historically threaten the middle class, both the protesters and the government can do little.
Thousands called for an end to Jordan's dealings with the IMF and demanded the resignation of Jordan’s Prime Minister, Hani Al-Mulki. The King himself has asked for the PM to resign, which he reportedley has done, and has temporarily frozen the tax hikes.
None of this fundamentally alters Jordan’s relationship to the IMF. Jordan has had 11 prime ministers since 2000, but has not been able to shake off its dependency on the IMF peer institutions like the World Bank.
IMF-backed policies are outliving individual governments in Jordan.
The government appears to be forced to comply with the IMF’s austerity recommendations to raise money for itself, pushing more into poverty, or face an eventual revenue crisis when its economy stalls and Jordan is unable to receive a bailout.
Both options could doom the Jordanian economy, which is already on the brink.
And the IMF will likely always recommend austerity measures.
In the IMF’s own words, “The IMF's primary purpose is to ensure the stability of the international monetary system—the system of exchange rates and international payments that enables countries (and their citizens) to transact with each other.” Another one of its stated core goals is to make the state as small as possible so it cannot meaningfully intervene in the economy.
In practice, this means all-but eliminating the public sector, welfare programs, and government subsidies.
© 2000 - 2021 Al Bawaba (www.albawaba.com)