• Research
  • Emissary
  • About
  • Experts
Carnegie Global logoCarnegie lettermark logo
DemocracyIran
  • Donate
{
  "authors": [
    "Ibrahim Saif"
  ],
  "type": "legacyinthemedia",
  "centerAffiliationAll": "",
  "centers": [
    "Carnegie Endowment for International Peace",
    "Malcolm H. Kerr Carnegie Middle East Center"
  ],
  "collections": [],
  "englishNewsletterAll": "",
  "nonEnglishNewsletterAll": "",
  "primaryCenter": "Malcolm H. Kerr Carnegie Middle East Center",
  "programAffiliation": "",
  "programs": [],
  "projects": [],
  "regions": [
    "Levant"
  ],
  "topics": [
    "Political Reform",
    "Economy"
  ]
}

Source: Getty

In The Media
Malcolm H. Kerr Carnegie Middle East Center

Jordan’s Tough Economic Choices

Jordan's budget deficit has reached an alarming level. As the government grapples with economic issues and enforcing subsidy reductions, protests have erupted across the country.

Link Copied
By Ibrahim Saif
Published on Dec 11, 2012

Source: Middle East Voices

Up until two weeks ago, fuel commodities in Jordan—including diesel—were sold at prices close to their actual cost. Cooking gas was even priced below market rates. This made it difficult for the Jordanian treasury to generate revenues from the sale of fuel commodities (with the exception of premium gasoline). 

But in mid-November, the country’s budget deficit reached alarming levels. According to the Jordanian Ministry of Finance, in the first nine months of 2012, the country’s loan-financed deficit stood at around $3.5 billion, roughly 16 percent of GDP. The government of Prime Minister Abdullah Nsour was forced to raise prices by reducing subsidies in order to preserve the stability of the economy and hence the Jordanian dinar. The price hike was pushed through despite the concerns of the security services about the threat of violent protest.

These fears were well-founded. Recent protests in Jordan have resembled reactions to previous experiments in subsidy reduction, all of which were eventually withdrawn under intense public pressure. The reaction to earlier reform attempts took Jordan by storm, with various regions of the country rocked by spontaneous protest. Two months ago, for instance, the interim government of Fayez al-Tarawneh attempted to make good on its pledge to raise fuel prices. Public backlash led Jordan’s King Abdullah II to intervene, and the government withdrew the price hike just one day after its announcement. 

Jordanians took to the streets even before the prime minister finished his announcement and justifications for increasing the prices. Political tension, corruption, and injustice all exacerbated the crisis, especially because subsidy reduction was not tied to a comprehensive economic policy or blueprint for serious political reform. Many Jordanians also complained about mismanaged public spending and the absence of government transparency. 

But the problem is more severe this time as Jordan has fewer financial alternatives and offers of aid to fall back on. Promises of aid and facilitated loans from some Arab states have already fallen through. Worse, an agreement with the IMF constrains the government’s ability to maneuver, leaving little room for compromise.

The prime minister has vowed to push through the price increase and the lifting of subsidies, claiming that backing down would amount to a “political crime.”

The government’s decision to proceed with the price hike indicates that it has chosen to follow through with measures to remove economic distortions in order to secure a $2 billion loan from the IMF. The price hikes also represent a change in the domestic political order. The fact that the system is no longer sustainable indicates that the government is no longer able to maintain a paternalistic political system.

The government appears to have succeeded in passing the subsidy reforms and restoring stability while proving its ability to make difficult decisions in order to secure the country’s economic future. The downside is that they will soon be forced to make other tough choices, including raising electricity prices and removing other types of subsidies, which together cost Jordan about $1.8 billion annually. In light of ongoing political tensions and the legacy of the Arab Spring, it will be difficult to enact these subsidy reforms before legislative elections that are scheduled for January 2013. 

Jordanians will closely scrutinize the government’s handling of public spending, seeking to limit the state’s extravagance and improve transparency regarding defense and security expenditures—which, while not subject to audit, now account for about 30 percent of the budget. 

But there are promising developments, too. The king’s annulment of the Civil Retirement Law has been well received by the public. This unpopular law gave members of parliament lifetime pensions, and its removal has been viewed as a positive first step toward reforming public expenditure.

Jordan will continue to face economic challenges and must take steps to restore the momentum of economic growth, mobilize private sector resources, and attract foreign investments—all of which have served to benefit foreign currency reserves and job creation in the past. Accomplishing these goals will require drafting a new economic vision that can form the basis of lasting economic stability while still taking into account Jordan’s changing political climate. It calls for addressing the current decline in the quality of Jordan’s public administration by including more voices in the decisionmaking process and transitioning toward a merit-based system of government in which administrative positions are awarded based on an official’s qualifications, not his or her political malleability. 

The government must involve all key political actors in policymaking in order to foster an environment of cooperation and responsibility rather than blame and accusations. All of these measures are necessary because, at the end of the day, overcoming Jordan’s current economic impasse is a collective responsibility. 

This article was originally published in Middle East Voices.

About the Author

Ibrahim Saif

Former Senior Associate, Middle East Center

Saif is an economist specializing in the political economy of the Middle East. His research focuses on international trade and structural adjustment programs in developing countries, with emphasis on Jordan and the Middle East.

    Recent Work

  • Paper
    The Private Sector in Postrevolution Egypt

      Ibrahim Saif, Ahmed Ghoneim

  • Paper
    The Economic Agenda of the Islamist Parties

      Ibrahim Saif, Muhammad Abu Rumman

Ibrahim Saif
Former Senior Associate, Middle East Center
Ibrahim Saif
Political ReformEconomyLevant

Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.

More Work from Carnegie Endowment for International Peace

  • Commentary
    Strategic Europe
    There Is No Shortcut for Europe in Armenia

    Europe has an interest in supporting Armenian leader Nikol Pashinyan as he tries to make peace with neighbors and loosen ties with Russia. But it is depersonalized support in the long term, not quickfire flash, that will win the day.

      Thomas de Waal

  • Article
    From Labor Scarcity to AI Society: Governing Productivity in East Asia

    The debate over AI and work too often centers on displacement. Facing aging populations and shrinking workforces, East Asian policymakers view AI not as a threat, but as a cross-sectoral workforce strategy.

      Darcie Draudt-Véjares, Sophie Zhuang

  • Article
    Governing AI in the Shadow of Giants: Korea’s Strategic Response to Great Power AI Competition

    In its version of an AI middle power strategy, Seoul is pursuing alignment with the United States not as an endpoint but as a strategy to build industrial and geopolitical leverage. Whether this balance holds remains an open question.

      Darcie Draudt-Véjares, Seungjoo Lee

  • China Financial Markets
    Commentary
    China Financial Markets
    Is China’s High-Quality Investment Output Economically Viable?

    China’s rapid technological progress and its first-rate infrastructure are often cited as refuting the claim that China has been systematically overinvesting in non-productive projects for many years. In fact, as the logic of overinvestment and the many historical precedents show, the former is all-too-often consistent with the latter.

      Michael Pettis

  • Article
    Smuggling and Civil Peace on Lebanon’s Border: The Case of Summaqiyyeh

    The Lebanese authorities’ clampdown on illicit cross-border activity threatens to leave inhabitants of the historically neglected village, and the wider Akkar region, in an economically precarious position.

      Mohanad Hage Ali

Get more news and analysis from
Carnegie Endowment for International Peace
Carnegie global logo, stacked
1779 Massachusetts Avenue NWWashington, DC, 20036-2103Phone: 202 483 7600
  • Research
  • Emissary
  • About
  • Experts
  • Donate
  • Programs
  • Events
  • Blogs
  • Podcasts
  • Contact
  • Annual Reports
  • Careers
  • Privacy
  • For Media
  • Government Resources
Get more news and analysis from
Carnegie Endowment for International Peace
© 2026 Carnegie Endowment for International Peace. All rights reserved.