Chronicle of the Middle East and North Africa

Jordan’s Dependency on Foreign Aid Dictates Decision-Making

Jordan's government has been hamstrung for many years by its own dependence on various sources of international assistance.

Jordan’s Dependency Foreign Aid
Jordanian Parliament members gesture as they leave a session of the parliament in Amman, on December 8, 2021, to protest the presence of the minister of irrigation who signed the Israeli-Jordanian US-brokered solar power for water “declaration of intent” in Dubai. Khalil MAZRAAWI / AFP

Ali Noureddine

This article was translated from Arabic.

Jordan‘s government is expected to receive over $4 billion in foreign grants, loans, and soft loans this year – approximately the same amount as the year before.

The country, which suffers from an annual deficit of more than $3 billion a year, relies on such aid to prop up the government’s general budget.

The mere fact that this amount is equivalent to more than half of the nearly $7.43 billion tax revenues the Kingdom managed to collect over the year, underscores the importance of this foreign aid.

The size of reliance on foreign aid

Jordan’s government has been hamstrung for many years by its own dependence on various sources of international assistance without which it is unable to compensate for its basic expenditures.

The United States, for example, has provided $5.323 billion over the past four years, while the World Bank has provided a further $3.205 billion during the same period.

In addition, Jordan benefits from aid packages offered by European and Gulf nations, the European Union and the European Investment Bank, as well as a special financing program from the International Monetary Fund.

This state of affairs stands in stark contrast to promises made by successive Jordanian governments, which for decades have talked about promoting “self-reliance” and achieving economic stability with minimal reliance on loans and aid.

Instead, the scope of this assistance now includes financing for infrastructure projects, education, agriculture, food security, armament, employment programs, employment and economic development.

In fact, the overwhelming majority of the government’s sovereign roles rely on such aid.

Indeed, it does not seem like Jordan can dispense with its reliance on foreign financial support anytime soon.

It anticipates receiving $1.45 billion annually from the US between 2023 and 2029, while the EU has pledged to providing $2.83 billion by 2027 in packages that comprise grants and soft loans to promote Jordan’s green economy and infrastructure.

Furthermore, Gulf States and international institutions, including the International Monetary Fund, are expected to commit to a set of support programs in the coming years.

All of these measures will establish a long-term contractual relationship between various policy measures and foreign aid.

Dangerous political and economic repercussions

This reliance on foreign aid is concerning for Jordanians for the same reasons that their previous governments declared their intentions to do away with this dangerous phenomenon.

So long as economic stability in Jordan is contingent on support from certain countries or international blocs, the Kingdom will find it increasingly difficult to develop an independent foreign policy that is free of any pressure.

Many analysts indicate that Jordan is incapable of taking decisive foreign policy positions, resorting at times to ambiguity or contradictions, simply because it dares not anger its benefactors.

In regional conflicts, for example, the Kingdom is seeking to reconcile with the Gulf States, the US and European countries despite the contradictions among these three parties on numerous issues.

In addition, Jordan also attempts to accommodate its demographic reality and the high percentage of Jordanians of Palestinian origin without going as far as to challenge the Israelis when it comes to its foreign policy.

Furthermore, the states and international institutions providing support have pushed Jordan toward economic policies that do not necessarily serve the interests of its people, and in the long-term prevent the development of a sustainable economy.

Rather, these parties have often sought to impose policies and plans commensurate with their own visions for development, or their own regional and political interests.

A glaring example is when Jordan was forced to enter into free trade deals with the EU, the US and other countries that led to the weakening of its agricultural and industrial sectors in favor of Western exports.

And because of such policies imposed by these benefactors, Jordan is condemned to relying on financial support instead of seeking to build robust economic sectors.

The International Monetary Fund’s economic plans and programs

The most damaging and controversial policies imposed on Jordan by foreign supporters were those pertaining to the International Monetary Fund’s lending programs that began over three decades ago.

Due to the IMF’s demands, a number of policies were put into place, including the removal of subsidies for the most vulnerable groups, the privatization of numerous critical sectors, the liberalization of the financial markets, and the opening of the frontiers for unrestricted international trade.

The IMF’s requirements drew the ire of the Jordanian population during this time, who held the Fund responsible for the country’s economic stagnation.

The rapid transition toward neoliberal policies, such as lowering trade barriers and repealing customs protections with no regard to the state of the economy, led to the severe weakening of the local economic sectors’ ability to produce.

Jordan’s strategy prior to enrollment in the IMF programs was to preserve local productive sectors in the short term through a customs policy that levied fees on rival imports until the industry expanded and attained maturity.

However, the Fund’s program, forced the abandonment of this strategy, without adequate consideration of the nature of the Jordanian economy and its special circumstances.

As a result, with Jordan’s productive sectors derailed, what followed was a rise in unemployment rates and a growing reliance on imports.

The lifting of subsidies and raising of taxes, as per the Fund’s demands, also contributed to shrinking the middle class and increasing burdens on low-income populations, prompting numerous massive popular protests.

Meanwhile, the successive waves of privatization led to a rapid rise in the prices of basic services and a reduction in the number of employees in these sectors, which led to greater costs of living.

Factors of frailty in the Jordanian economy

Due to all these reasons, and since Jordan entered the IMF program in the late 1980s, plans to restructure the economy have failed to achieve their desired goals, instead rendering it weaker.

Poverty rates rose to 24 per cent at the end of 2021 while unemployment rates reached 22.8 percent by the end of the first quarter of 2022.

Amid such a turbulent economic environment, and with the general budget continuing to record high deficits, it is not surprising that the debt-to-GDP ratio rose to 113.8 per cent.

Moreover, as the society’s purchasing power declines due to poverty and unemployment, and with the productive sectors compromised, analysts expect the Kingdom to go into economic contraction by the end of 2022.

All these feeble economic policies have contributed to pushing Jordan into this predicament, making the government a hostage to foreign aid.

Jordan’s recent capitulation to UAE pressure to sign a tripartite investment agreement with Israel in the fields of water and energy is an example of how this reality has come to impact Jordan’s key decisions.

Despite opposition from within the Kingdom and expert warnings of the inherent hazards of having Jordan dependent on Israel for water supplies, the UAE was able to impose on Jordan this project that is in line with its new openness to Israel.

The finest illustration of the political ramifications of the Kingdom’s need for ongoing financial help is Jordan’s acquiescence to this pressure, despite the availability of less costly alternatives.

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