AMMAN (Reuters) - Shops and pharmacies closed in Jordan’s capital on Wednesday as some unions pressed ahead with a strike protesting against tax hikes, after King Abdullah replaced his prime minister to try to defuse public anger.

A child who came with his father holds a Jordanian flag while greeting policemen as they stand guard during a protest near Jordan Prime Minister's office in Amman, Jordan June 5, 2018. REUTERS/Muhammad Hamed

A draft law to raise income taxes and International Monetary Fund-driven reforms that have pushed up prices have sparked the country’s largest protests in years. Last week, more than 30 unions, representing tens of thousands of public and private sector employees, held mass rallies in Amman and other cities.

Many of them pulled out of Wednesday’s walkout after the king appointed former World Bank economist Omar al-Razzaz on Tuesday to form a new government and urged talks over the law. Razzaz replaces Hani Mulki, who resigned after refusing to scrap the tax reform bill.

Harvard-educated Razzaz, who was education minister, will start consultations on Wednesday to form a new government.

Some businesses in Amman were shut and hospital employees staged a protest, while hundreds of men and women converged outside the headquarters of the Professional Unions Association, although in smaller numbers than last week.

The protests have shaken Jordan, a U.S. ally that has mostly escaped the turmoil that has buffeted its neighbours in the Middle East in recent years.

Often seen as a unifying figure in Jordan, the king said the new cabinet must review the entire tax system and immediately start a dialogue over the tax law, which the government sent to parliament last month. He called for political parties, unions and civil society groups to take part in the talks.

Protesters had pressed on overnight, with hundreds rallying amid tight security in the capital though turnout appeared lower than for the past few nights.

Police blocked the roads to stop the sea of demonstrators with their picket signs from reaching the Cabinet office. “We don’t want a change of names, we want a change in policy,” one banner read. “Bring back bread subsidies,” another said.

Slideshow ( 9 images )

Some celebrated the change in leadership and said they would wait to see if the steps would stop price hikes which they said hit the poor.

“I personally feel optimistic and we started to feel the beginning of change,” Murad Yaghan told Reuters at a late night protest as people around him chanted against the government’s economic policies. “We will continue public pressure.”

On Wednesday, closed shops hung signs saying “I’m taking part in the strike” but life in the capital mostly went on as usual. The doctors’, engineers’, and lawyers’ unions were the main ones taking part in the walkout.

“This gathering today, and this strike that includes most of the professional unions, is to assert our demands and place pressure to achieve them,” said Monther Howarat, a doctor protesting outside King Hussein Cancer Centre.

REFORMS

Public resentment has been building since bread subsidies were ended and the general sales tax hiked steeply earlier this year under an IMF-driven plan to cut Jordan’s $37 billion debt.

The government has said it needs funds for public services and argues the reforms will reduce social disparities by placing a heavier burden on high earners.

The king’s letter designating Razzaz said the hikes had burdened Jordanians and called for better services, blaming regional instability for hampering the sluggish economy. It suggested the government could shelve the new tax law and slow the pace of price rises.

Lawmakers were on course to ask the king’s permission for an early exceptional session, with a majority demanding the withdrawal of the tax law, the speaker of parliament has said.

Officials say Razzaz had been an opponent of reforms that hurt the poor. His appointment still sends a message to foreign donors that Jordan will press ahead with reforms, though in a gradual way, they said.