Jordan’s King Abdullah tries to calm an angry public

TO LAND a job in Jordan’s public sector is to land a job for life—unless you are the prime minister. Starting on May 30th thousands of Jordanians came out to protest against subsidy cuts and new taxes planned by the government of Hani Mulki. On June 1st King Abdullah tried to appease them by cancelling increases to fuel and electricity prices. When that failed he sacked Mr Mulki, the sixth prime minister to lose his job since 2011. But on June 4th protesters were back in the streets.

Few Jordanians will miss Mr Mulki, a maladroit politician. But he was arguably Jordan’s most reform-minded prime minister. Before he took office in 2016 the kingdom was careering towards insolvency, with a debt-to-GDP ratio that had soared from 62% in 2011 to 93% four years later. Mr Mulki halted the slide by raising revenue and reducing energy subsidies. The debt ratio has stabilised at 95%. The government also accepted a $723m loan from the IMF with promises of further reforms.

Those changes are long overdue. Jordan acts like an oil-rich Gulf state, with generous subsidies and a public sector that employs one in three workers. But it has no natural resources. The economy grew by a paltry 2% last year. Wars in Syria and Iraq, and a recession in Saudi Arabia, have hurt Jordanian exporters. Regional turmoil has also scared off tourists.

Jordan can no longer count on Gulf largesse, like a $5bn grant offered in the first days of the Arab Spring in 2011. “Saudi Arabia kept the Jordanian economy afloat,” says a Western diplomat. But the Saudis are upset with Jordan’s reluctance to send troops to Yemen and its refusal to join an embargo of Qatar. They have not offered a rial since 2016. Though America will give Jordan $6.4bn over the next five years, a 28% increase over the last aid package, this will not fill the gap.

The IMF wants Jordan to lower its debt-to-GDP ratio to 77% by 2022. Officials hope to achieve that through growth. But since 2010 the growth rate has been stuck at 3% or less, and the IMF expects it to stay there until 2022.

Instead, Jordan will need to balance its budget. But this will hurt an already struggling population. One in five Jordanians lives below the official poverty line of 70 dinars ($99) per month. That is hard to survive on anywhere in Jordan, especially in Amman, the expensive capital. One of the protest slogans is ma’nash, or “we have nothing”. It is only a slight exaggeration.

The poorest Jordanians get help from the National Aid Fund, a state-run body that makes payments to 92,500 families. A recent study found that most beneficiaries get less than 50 dinars each month. The latest budget also introduced a new $250m cash-transfer scheme. It will cover public-sector employees who earn less than 18,000 dinars per year, and other Jordanians who meet a lower income threshold. The average recipient will get around 30 dinars each month. A huge portion of Jordan’s welfare spending goes on inefficient subsidies, but cutting them provokes fury. Fuel prices have increased five times this year; electricity rates are up by 55%. Bread prices nearly doubled in January.

A proposed income tax worries Jordan’s middle class. For all the controversy it has caused, the draft law being discussed in parliament is quite cautious. It would lower the minimum taxable income to 8,000 dinars per year for individuals and 16,000 for families (from 12,000 and 24,000). Those are still generous exemptions in a country with an average salary of around 5,400 dinars. MPs wager that the bill would expand the tax base to 10% of the population, up from 3%, and raise a modest 300m dinars a year. But trade unions say it would harm members. Many took part in a general strike on June 6th.

King Abdullah has told the new government to review the entire tax system. But the new prime minister, Omar al-Razzaz, a former World Bank economist, will have little room for manoeuvre. Jordan cannot afford to step back from fiscal reforms. More unrest seems likely. The Islamic Action Front, the local wing of the Muslim Brotherhood, wants early elections. A few protesters have even chanted slogans against the monarchy. For decades Jordanian leaders could count on wealthy allies to pay for short-sighted economic policies. The bill is coming due.