* Reshuffle latest shakeup in top state bodies
* Jordan feels threatened ahead of Middle East peace plan
* PM gets new mandate to accelerate economic reforms
By Suleiman Al-Khalidi
AMMAN, May 9 (Reuters) - The Prime Minister of U.S. ally Jordan reshuffled his cabinet on Thursday, the latest in a series of institutional shakeups in recent weeks that officials describe as an effort to meet the kingdom’s mounting challenges.
The reshuffle by premier Omar al-Razzaz, his third since taking office almost a year ago, affected eight ministers but also left key portfolios in place, including those of finance and foreign affairs.
It comes on the heels of leadership changes in the powerful General Intelligence Department(GID), which has extended its pervasive influence across public life in recent years.
King Abdullah appointed General Ahmed Husni last week to head the agency after dismissing his predecessor, praising the spy agency’s role but citing abuses by a small group whom he accused of placing personal interests above the country.
The king had days before approved a restructuring of his own office within the royal palace, bringing in new faces that expanded his team of senior advisors.
These changes coincide with sluggish economic growth and official concern about the repercussions on Jordan of a Middle East peace plan to be put forward by the United States after the end of the Muslim holy month of Ramadan in early June.
King Abdullah has expressed concern that the secret plan could push Jordan to accept a solution at his country’s expense, forcing it to accept the permanent settlement of many of his subjects of Palestinian origin.
Officials say Thursday’s government reshuffle will also solidify Razzaz’s mandate to accelerate economic reforms, seen as crucial to spur growth in the debt-straddled country.
“We are going through a situation filled with challenges,” Razzaz said in comments after the new cabinet lineup.
The former World Bank economist took office last June at the height of a political crisis that saw some of the largest protests in years over IMF-driven austerity measures including steep tax hikes that critics say hit the middle class.
He has faced criticism from the conservative establishment that dominates parliament, which accuses him of a pro-Western reform agenda promoting harsh IMF measures that worsen the plight of lower-income households and the poor.
Although large street protests have fizzled out, a disparate opposition composed of disgruntled low paid state employees and middle class activists continue to hold small protests against government policies blamed for rising poverty and growing unemployment among youths.
Razzaz has defended the IMF-backed reforms, saying Jordan can no longer afford to sustain a large bloated public sector whose salaries eat up the $13 billion budget with an economy burdened with a record public debt of around $40 billion.
Reporting by Suleiman Al-Khalidi, Editing by William Maclean