June 11, 2018 / 2:09 AM / 14 days ago

Gulf states pledge $2.5 billion aid package to Jordan

DUBAI (Reuters) - Saudi Arabia, Kuwait and the United Arab Emirates pledged $2.5 billion of aid to Jordan on Monday, a joint statement from the Gulf states said, following austerity measures that have sparked massive protests in the country.

Price hikes and subsidy cuts pushed thousands of Jordanians to the streets last week against the government’s economic policies. The rare, peaceful protests prompted King Abdullah to sack the government and appoint a new prime minister, whose first pledge was to shelve steep tax hikes.

Other monarchies are worried that unrest in the U.S. ally could spill over across the region where other countries such as Bahrain and Egypt have been facing similar challenges.

The three wealthy Gulf states said Jordan would receive as much as $2.5 billion of aid to help it weather the economic and political crisis.

The package includes a deposit in Jordan’s central bank, guarantees to the World Bank, annual budget support for five years, and development projects, the statement carried by the Saudi state news agency, SPA, added.

The decision was taken in the Muslim holy city of Mecca in Saudi Arabia where King Salman hosted a summit with Jordanian King Abdullah, Kuwait’s emir, Sheikh Sabah Al-Ahmad Al-Jaber al-Sabah, and UAE Vice President Sheikh Mohammed Bin Rashed.

Jordan is pushing fiscal consolidation measures required under an IMF financing programme including tax increases and subsidy cuts that have weighed on poorer and middle-lass families.

Jordan’s newly designated prime minister, Omar al-Razzaz, said on Thursday he would drop a proposed income tax bill, conceding to a key demand of protesters who had already brought down the previous government.

Jordan’s biggest protests in years began eight days ago over tax increases and subsidy cuts pushed by the International Monetary Fund to reduce the country’s big public debt.

Reporting by Aziz El Yaakoubi and Sarah Dadouch; Editing by Sandra Maler and Peter Cooney

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