CONTENT PREVIEW
Country Risk

Gulf countries to use aid to leverage Jordan’s support for a US-proposed Israel-Palestine peace deal, increasing protest risks

12 June 2018

Key Points

  • Saudi Arabia is likely to push for Jordanian support for its foreign policy objectives, specifically countering Iranian influence in the region by increasing co-operation with Israel and accepting any US issued Israeli-Palestinian peace initiative approved by Saudi Arabia.
  • Designated Prime Minister Omar al-Razzaz’s new government is likely to proceed with IMF-mandated economic reforms, albeit at a slow pace, reducing the likelihood of Jordan reducing its debt-to-GDP ratio to 77% by 2021.
  • This probable linkage established by Saudi Arabia between aid for Jordan’s economy and foreign policy issues risks deepening resentment and raising unrest risks. Protests that combine demands for less austerity and foreign policy changes would indicate an increase in political instability risks.

Event

Saudi Arabia, United Arab Emirates, and Kuwait offered USD2.5 billion in financial support to Jordan at a conference in Mecca on 10 June.King Abdullah II of Jordan attends a session of the Economic Forum (WEF) annual meeting on 25 January 2018, in Davos, Switzerland. (Getty Images/AFP/Fabrice Coffrini)King Abdullah II of Jordan attends a session of the Economic Forum (WEF) annual meeting on 25 January 2018, in Davos, Switzerland. (Getty Images/AFP/Fabrice Coffrini)

Jordan has accepted the Gulf Arab financial package on offer, which includes a cash infusion to the Central Bank, guarantees to the World Bank, five-year budgetary support, and financing for development projects through a development fund. The official statement from the conference did not include itemisation.

The measure followed protests across Jordan between 30 May and 7 June, which werecalled against a draft income tax law. Separately, the 2018 budget attempted to increase self-sufficiency by reducing subsidies and increasing taxes. This led to a middle-class protest movement against austerity, which was joined by the Islamic Action Front (the Muslim Brotherhood’s political wing) and Hirak, a movement from among Jordan’s tribes opposed to corruption and alleged abuses of royal power.

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