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Abu Dhabi, UAESaturday 15 December 2018

Hundreds of Jordanians seek PM's resignation over tax law

The rallies came several months after Omar Razzaz' predecessor was toppled in large-scale protests

Demonstrators take part in a protest against tax hikes in Amman, Jordan November 30, 2018. The sign reads 'al-Razzaz is liar more than al-Mulqi'. Reuters
Demonstrators take part in a protest against tax hikes in Amman, Jordan November 30, 2018. The sign reads 'al-Razzaz is liar more than al-Mulqi'. Reuters

Hundreds of protesters have called on the Jordanian prime minister to resign over his tax policies and accused him of failing to improve the country's economy.

Friday's protests in Jordan's capital of Amman came several months after Omar Razzaz took office following nationwide protests against tax reforms introduced by his predecessor, Hani Mulki. Critics at the time said the changes proposed by Mr Mulki's government would affect mostly the poor and middle class.

Mr Razzaz promised to revise the tax reforms to be more inclusive, but is also under pressure from international lenders to cut the government's large deficit. The new tax law, passed by parliament last month, introduced only cosmetic changes to the earlier bill, critics say.

Mr Razzaz said the law's passage is needed to get a clean bill of health from the IMF and lower the cost of servicing more than $1.4 billion (Dh5.14bn) in foreign debt due next year. Finance Minister Izzedin Kanakrieh said it would help the government crack down on rampant tax evasion.

But on Friday, protesters chanted, "Leave, leave Razzaz" and called for the new tax bill to be annulled. They also accused the government of failing to tackle high-level corruption and to end the squandering of public funds.

Jordan's economy has been badly hit by conflict in neighbouring Syria and Iraq, both traditionally major trading partners.

Its public finances are under strain and the government is struggling to curb a public debt of more than $37bn, equivalent to 96 per cent of GDP.

An expansionist fiscal policy in previous years, characterised by job creation in the public sector, had pushed the debt to record levels.

Over the past two years the kingdom has raised general sales taxes and cut subsidies under an IMF austerity programme aimed at lowering public debt to 77 per cent of GDP by 2021.

But the austerity steps have hurt the economy, with growth expected to continue to stagnate at about 2 per cent next year. That is almost half the levels seen over the last decade during a boom period fed by high aid levels and capital inflows and investments.

At the same time, Jordan cannot expect high levels of aid that have underpinned the stability of the kingdom to be maintained indefinitely, western donors say.

Jordan's regional allies offered their support recently, with the UAE, Saudi Arabia and Kuwait together extending a $2.5bn package to stabilise the economy.

The three countries deposited more than $1bn in Jordan's central bank in early October as part of the package, which includes $600m in credit guarantees to help the kingdom secure World Bank financing for infrastructure projects and other development initiatives.

Jordan's cabinet approved last week approved a budget of 9.25bn dinars (Dh48bn) for 2019, with a projected deficit equal to 2 per cent of GDP.

Tax increases will boost state revenues to 8.6bn dinars, according to the budget, which also estimates foreign aid to be about 600 million dinars.

The budget has to be approved by parliament.