Fiscal austerity is a thankless task, even when the patient’s short-term pain is essential to prevent long-term problems. Jordan provides a cautionary tale, with a new poll showing that the government of Prime Minister Hani Al Mulqi, in office for the last year and a half, has reached record levels of unpopularity following a 2018 budget that began to staunch the kingdom’s economic hemorrhaging.
While it is not uncommon for Jordanian governments to have approval-ratings hovering around the 50-percent mark, 68 percent of Jordanians now say the country is moving “in the wrong direction,” according to a survey by the Center for Strategic Studies at the University of Jordan, the only widely respected polling center in the country. While 30 percent express confidence in the government, a whopping 74 percent believe conditions in the country have worsened over the past year and 55 percent think conditions will get worse still in the year to come.
Al Mulqi has had a rough 2018, which began with passing the budget into law on January 18. While he isn’t getting much love from the public for it, Al Mulqi, with a mandate from King Abdullah II, saved Jordan from national insolvency. Under his predecessors, debt had been spiraling out of control. With the debt-GDP ratio at more than 93 percent when Al Mulqi took office, a continuation of this trajectory was unsustainable, even with ever-increasing dependence on the United States for grant aid and on the International Monetary Fund for loans.
What Al Mulqi did was what many politicians only talk about – he made hard choices. On the revenue side, internal revenue from taxes, customs and fees increased from 6.2 billion dinars ($8.7 billion) to 6.9 billion dinars, which is projected to rise to 7.8 billion dinars by this year, meaning more than 10-percent increases in revenue extracted from a struggling economy for two years in a row. Jordan’s GDP growth rate has been just more than 2 percent in recent years.
On the spending side, Al Mulqi cut subsidies on electricity, fuel and bread, although this was not enough to keep overall spending from increasing due to increases in pensions, debt interest and security. The net result of this substantial increase in revenues with a slowed rate of spending growth meant the deficit fell to 2.5 percent of GDP, although it would be about double that without foreign aid. The result is that instead of the debt-GDP ratio increasing by 5 percent per year, it is now increasing by less than 1 percent.
The government quickly faced a no-confidence vote in parliament, led by the Muslim Brotherhood-affiliated National Reform Alliance. The vote on February 18 failed, with 49 votes in favor, 67 against and 14 absent or abstaining. The result was a foregone conclusion, as parliamentary elections are heavily gerrymandered to ensure a majority is elected from pro-government rural tribes, a minority of the population.
A week later, King Abdullah decreed the government’s sixth cabinet reshuffle, a tactic that traditionally has been used to placate popular dissatisfaction. The number of reshuffles in a year and a half gives a sense of the pressure this government is under. The change saw eight ministers moved to new posts or dismissed and nine join the cabinet. The most significant move saw Jaafar Abd Al Fatah Hasan, who had been the head of the king’s personal office, shifted to become deputy prime minister for economic affairs.
Hasan’s move from working directly for the king to become Al Mulqi’s deputy naturally created an impression that the reshuffle was meant to increase the monarch’s direct control over economic policy. This was especially notable given indications that the prime minister was suffering from serious health problems after he spent late March and the first half of April out of the public eye while undergoing chemotherapy in Amman. He returned to parliament to defend the government on April 17. While it was clear that he had lost substantial weight, he spoke vigorously in response to critics.
While sympathy with his struggle with cancer seems to have spared Al Mulqi some criticism, the new poll numbers show that the January budget has had a heavy impact. Beyond expressing broad unpopularity, respondents cited disapproval, first, of rising prices and, second, a perceived weakness fighting corruption. When asked how they rated the country’s problems, 34 percent of respondents said rising prices were the main concern, followed by 21 percent citing unemployment, 16 percent weak economic growth and only 7 percent poverty.
Yet the rising prices resulted from the subsidy cuts related to a fiscal adjustment, which the government simply cannot avoid with the debt-GDP ratio over 95 percent. It is worth noting that the poll, which always includes a parallel sampling of opinion makers, showed that more informed citizens did not view subsidy cuts as a core problem but focused on the weakness of the economy. If Al Mulqi’s government wants to shore up its popularity, it will need to do a better job convincing the public that hard measures are necessary. More than just the survival of this government is at stake.
Kirk H Sowell is a political-risk analyst and publisher of the biweekly newsletter, Inside Iraqi Politics.
AFP PHOTO/JEWEL SAMAD