Saudi Arabia, Kuwait and the United Arab Emirates pledged $2.5 billion in aid to Jordan as the US-allied kingdom faces its worst protests in years over austerity plans that included tax increases.

In this photo released by Saudi Press Agency, SPA, Saudi King Salman, second right, receives Jordan's King Abdullah II, right, and Emir of Kuwait, Sheikh Sabah al Ahmad al Sabah, second left, and Sheikh Sheikh Mohammed bin Rashid al Maktoum, Vice President and Prime Minister of the UAE and ruler of Dubai, in Mecca, Saudi Arabia, Monday, June 11, 2018.
In this photo released by Saudi Press Agency, SPA, Saudi King Salman, second right, receives Jordan's King Abdullah II, right, and Emir of Kuwait, Sheikh Sabah al Ahmad al Sabah, second left, and Sheikh Sheikh Mohammed bin Rashid al Maktoum, Vice President and Prime Minister of the UAE and ruler of Dubai, in Mecca, Saudi Arabia, Monday, June 11, 2018. ( AP )

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 US 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 four-nation summit with Jordanian King Abdullah, Kuwait's emir, Sheikh Sabah al Ahmad al Jaber al Sabah, and UAE Vice President Sheikh Mohammed Bin Rashed.

The move came a day after European Union foreign policy chief Federica Mogherini announced $23.5 million (20 million euros) in aid for Jordan following a wave of anti-austerity protests that led to the prime minister's resignation.

The EU will support Jordan "with all possible means at our disposal including economic and financial means," Mogherini said during a visit to Amman. 

"This is a country that has a vital role to play in the region," she told a news conference.

"You will have always the EU at your side fully supporting your reform work."

The funds would "address in particular the needs of Jordanians that are particularly vulnerable," Mogherini said.

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-class 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.

Source: Reuters