What’s Behind Gulf Aid Package to Jordan?

Saudi Arabia, the United Arab Emirates (UAE) and Kuwait pledged on June 11 to give Jordan $2 billion in economic aid to navigate its growing economic crisis, following two weeks of mass protests that swept Amman and resulted in the removal of former Jordanian Prime Minister Hani al-Mulki.

What’s Behind Gulf Aid Package to Jordan?

Saudi Arabia, the United Arab Emirates (UAE) and Kuwait pledged on June 11 to give Jordan $2 billion in economic aid to navigate its growing economic crisis, following two weeks of mass protests that swept Amman and resulted in the removal of former Jordanian Prime Minister Hani al-Mulki.

Leaders from the three Gulf countries convened at a summit in Mecca where they decided on an aid package that will inject much needed cash into Jordan’s Central Bank and provide smaller direct payments over a five-year period. Riyadh, Abu Dhabi and Kuwait claim that the aid is nothing more than a display of “brotherly solidarity.” However, the trio almost certainly has ulterior motives, namely ensuring that popular uprisings do not spill over into the rest of the region while also increasing their leverage over Jordan regarding other geopolitical matters.

The details of the aid package are still vague, but at a minimum, it will provide between $150 and 300 million in annual direct aid over a five-year period as well as a one-time direct deposit of $500 million to $1 billion to the Central Bank of Jordan. The money will not come close to solving all of Jordan’s economic woes, but it will help the kingdom pay down some of its previous debts. Economist Zayyan Zawaneh told the Jordan Times in an interview, “[A]nnual debt service is about $1.5 billion. We should not borrow more, but the fact remains that the Gulf’s guarantees will help Jordan secure loans at lower interest rates.”

Jordan’s lack of natural resources has made it heavily reliant on foreign aid for the last half-century. The economy has slipped into crisis as its public debt ratio has reached roughly 95 percent of its current GDP, and unemployment has soared to a 25-year high of 18 percent. To make matters more severe, Amman has taken in some 1.5 million Syrian and Iraqi refugees in recent years, further straining its economic resources.

In an effort to cut spending, the regime has introduced austerity measures that have stretched to the limit the budgets of average Jordanians, especially members of the middle class. According to The Arab Weekly, anthropologist Wael Khateeb confirmed “[T]he recent protests, contrary to … those of 2011 after the ‘Arab spring,’ were held by the middle class, which was the hardest hit by the reforms.” 

Two weeks of popular protests erupted on May 30 when the government introduced a law to increase income tax. Protesters demanded that the regime reform its economic approach, abandon subsidy cuts to basic goods like fuel and electricity, and halt borrowing from international financial institutions, such as the IMF. The protests finally ended on June 6, following the resignation of then-Prime Minister Hani al-Mulki, who was replaced by Omar al-Razzaz. Razzaz formed a new government on June 14 and withdrew the income tax proposal and promised to suspend subsidy cuts for now.

The Gulf trio likely has two major motivations for offering Jordan an aid package. First, it is concerned that social unrest could threaten stability in the region as happened during the 2011 Arab uprisings, when the Gulf Cooperation Council (GCC) granted Jordan a $5 billion aid package to help King Abdullah II navigate the crisis. Some analysts also believe the three Gulf donors are worried that Iran or the Muslim Brotherhood might exploit social unrest in Jordan in an attempt to weaken the country.

The second incentive is that Riyadh, Abu Dhabi and Kuwait may be trying to gain leverage over Jordan on other geopolitical issues. First, the three were disappointed that Jordan only downgraded diplomatic relations with Qatar instead of completely severing them in response to the blockade led by Saudi Arabia, Egypt, the UAE and Bahrain against Doha. Jordan, furthermore, refused to designate the Muslim Brotherhood as a terrorist organization as Saudi Arabia and its allies would like. Jordan also refrained from participating in the Saudi coalition in the ongoing war in Yemen, as Saudi Arabia had expected. Finally, Riyadh desires Amman to back the position held by Saudi Arabia, the U.S., and Israel in support of the “deal of the century,” which refers to the latest attempted peace agreement to resolve the Israeli-Palestinian conflict.

The Gulf countries’ aid package alone is unlikely to push Jordan to take a firm stance on any of these four issues, but it could constitute additional leverage that sways the kingdom in the future if coupled with other factors. As for the unrest in Jordan, it is also improbable that the aid will have a major effect toward stemming future protests. The pledge is not a large enough sum relative to Jordan’s debt load to solve Amman’s economic problems even in the short-term. Jordan, moreover, has a history of major economic protests, which also occurred in 1996 and 2012, and are likely to break out again as soon as the regime introduces any significant spending cuts. King Abdullah II may need to prepare to weather the storm, however, as Jordan’s economy is not likely to improve without some much-needed economic restructuring.