Three Gulf Arab states pledged $2.5bn in aid to Jordan in an effort to stabilise the kingdom as it faces its worst protests in years over government austerity plans that include tax increases and price hikes.
The aid, pledged by Kuwait, Saudi Arabia and the United Arab Emirates, will go towards a deposit in Jordan’s Central Bank, cover World Bank loan guarantees for the kingdom, direct budget support in the form cash deposits and finance other development projects.
The economic aid package is critical to ease Jordan’s current budget deficit, which amounts to about $700m.
The hope is the five-year aid package, which mirrors a similar aid package offered by Gulf states in 2011, will help Jordan come up with a new, more-palatable austerity plan to satisfy international lenders and its public.
The decision came after an early morning meeting in Mecca attended by Jordan’s King Abdullah II, Saudi King Salman, Kuwait’s ruling Emir, Sheikh Sabah Al Ahmad Al Sabah, and Dubai’s ruler Sheikh Mohammed bin Rashid Al Maktoum, the UAE’s vice president and prime minister.
Official Saudi press agency statement quoted King Abdullah II as saying he hoped the aid would help his country overcome its fiscal crisis.
The government of Jordan’s Prime Minister Hani al-Mulki resigned after protesters blamed it for Jordan’s economic mismanagement.
King Abdallah II then asked education minister in the outgoing government, Omar al Razzaz to form the new government.
Razzaz later pledged to scrap the law and engage in dialogue to reach a new consensus on a new tax and economic reform.
The pledge from the GCC was to last five years. It expired last year and so far the six-member GCC has yet to offer any additional funding as the bloc remains split by a diplomatic crisis with Qatar.