AMMAN, JORDAN and YONKERS, NY — December 5, 2019 — Jordan Prime Minister Omar al-Razzaz today occurred that it was pertinent to increase government spending by raising public sector wages. The government’s decision will cover some 700,00 state employees, which also includes army personnel,civilian, and military retirees. This, despite the increase in government spending by which this move will entail.
“The economic situation and the exceptional circumstances that Jordan is going through in the region necessitates improving living conditions,” al-Razzaz informed the audience comprised of officials and prominent figures.
Mindful of the angry protests in neighboring countries, as witnessed in Lebanon, Iraq, even Iran, due to eroding living standards, corruption,and the lack of employment opportunities, the government has so decided to move. The government is also mindful to not resort to imposing new taxes to which they promised the nation.
Last year, the International Monetary Fund (IMF) coerced the imposition of onerous taxes on the kingdom. It was the catalyst that ignited some of the largest demonstrations in Jordan. Economists and politicians suggested the demonstration were a major factor in the contraction of business activity.
Prime Minister al-Razzaz noted that the last significant public sector pay rises date back to 2010 and 2011 respectively. They were part of billions of dollars in extra social spending to mitigate the protests inspired by regional uprisings.
The public sector has expanded rapidly over the last two decades as successive governments sought to appease citizens with state jobs to maintain stability. The runaway spending exacerbated to a $40 billion
The runaway spending contributed to a public debt that soared to $40 billion, equivalent to 94 percent of GDP (gross domestic product) which Jordan has been struggling to rein in under a three-year IMF program that ended this year.
The latest wage increase, implemented and initiated in 2020, affords state workers, from bureaucrats to drivers, pay increases ranging from 15 to 20 percent along with other substantial rises to army pensioners and civil servants. The costs will burden Jordan by an estimated additional $700 million in salaries and pensions that consume the preponderance of $14 billion anticipated in the 2020 draft budget.
The IMF has been been alarmed at the government’s decision and an IMF mission which visited in November is expected to return sometime in January 2020. Talks are expected to focus on a reform program not yet defined, but Jordan will resist any austerity measures, wary of increasing instability and civil unrest. The government’s plan is to formulate a program focused on raising growth that has remained stagnant at about 2 percent in the last decade and reduce record unemployment, which has risen sharply in the last two years to 19 percent.
The government anticipates higher revenues will culminate in revived economic activity which to date has been eviscerated by regional turmoil. The changing prospects in Jordan are anticipated to offset the wage bill hikes.
Finance Minister Mohammad al-Ississ said, “We hope it will push growth and raise revenues and move the wheels of the economy.”