Last week protests broke out in Jordan after the government decided to raise taxes on food items and services. People rallied in several cities, including in the capital Amman. The crowds protested against the taxation policies, and called for the resignation of the government.
Economic situation and the IMF
The protests are an indirect response to Jordan’s signing of an agreement with the IMF in July 2016, leading the country to try and reduce its budget deficit of 1.2 billion dollars by raising taxes. The agreement will in turn give Jordan the ability to access 700 million dollar in loans. Finance Minister Ohar Malhas has defended the IMF programme saying it seeks to implement gradual fiscal reforms to lower public debt and boost economic growth. Critics however warned that the price hikes and increasing of taxes will result in more Jordanians ending up below the poverty line.
The IMF’s aid to Jordan doesn’t come unexpectedly; conflicts in Syria and Iraq have damaged the tourism sector and interrupted trade routes. As a result the GDP growth of 2.4 percent in 2016 has been the lowest in years, while the unemployment rate of 14.6 percent in 2016 has been the highest. This has caused great dissatisfaction among the Jordanian population.
In January 2016 the Jordanian parliament approved this year’s budget which includes raising 643 million dollars in additional taxes and tariffs. Shortly after on the 1st of February the government decided to act in accordance with recommendations of the fuel pricing committee to raise the prices of gas, kerosene and diesel. Another tax rise on food on services led to Jordanians to rally in several Jordanian cities last week. Protesters came out with slogans such as "We cannot pay the bills for the corrupt." They argued that the increasing of taxes have affected the lower- and middle-class, and urged the Jordanian government to put more effort into combating corruption, such as embezzled state funds. Protestors said that Jordan's budget deficit could be paid by returning embezzled state funds from a couple of corrupt people if their cases are properly investigated. Authorities have tried to silence those speaking out against the economic measures; in January they arrested a long list of activists who had launched campaigns protesting the government’s economic policy.
Yesterday on the 26th of February the government stated that it is carrying on with its administrative reforms. After reducing governmental expenses and changing sales tax regulations it is now launching a set of economic incentives to boost the economy's performance.