Jordan on horns of dilemma over need to raise fuel prices

AMMAN // Like other regimes attempting to address the root causes of the upheavals spreading through the region, Jordan's government is caught in a dilemma: to raise or not to raise fuel and electricity prices.

Jordan, in the midst of its worst economic crisis in years, has been hit hard by the surge in international oil prices. A recent sabotage attack on an Egyptian gas pipeline that feeds the kingdom interrupted supply and added to the country's energy woes.

While protests in Jordan over the past two months have been relatively small, they have been as much against economic hardship as about political reform and corruption.

Imad Hmoud, an independent business analyst, said: "People cite institutionalised corruption and overspending as the main reasons for the country's financial mishaps."

"Therefore, if the government talks about raising prices, first thing people say is why doesn't it get the corruption money back?"

"The government is preparing people for a gradual price hike, but they are afraid it would backfire and lead to an uprising or riots that would undermine the country's stability."

Jordan has an unemployment rate of more than 13 per cent and rising poverty where nearly 13 per cent of the 6.4 million population live on less than 680 Jordanian dinars (Dh3,500) a year.

The public have a deep mistrust of the government's commitment to fighting corruption and low salaries further increase public anger.

Jordan imports 96 per cent of its energy and an energy price increase would reduce the budget deficit of 1.16 billion dinars, or 6 per cent of the GDP. Economists expect the deficit to reach 2bn dinars by the end of this year.

Mohammed Abu Hamour, Jordan's finance minister, said this month the interruption of natural gas supplies caused by last month's attack on a pipe in Sinai is costing the kingdom around 3 million dinars a day.

"The government is looking into alternatives to face the increased price of fuel imports for electricity generation," he said in a conference in Amman this month. "It is considering adjusting electricity tariffs for high-end users but not for middle and lower income segments of society. But the government has not decided what it will do."

"The surge of oil prices in international markets is placing pressure on the budget. The expected price per barrel was $95 when the government drafted the budget," he said. "This requires additional measures to maintain the deficit." The price is now at $110 a barrel.

Early this month, Jordan created a 38-member national economic committee, hoping to come up with a quick fix for the country's economy.

On Sunday, the committee recommended that the government continued to subsidise basic goods and maintained the current prices of oil products "for the time being".

The government started rationing electricity this month. Many street lights have been turned off and the use of air conditioning has been banned in government offices.

But the government, according to analysts, is fretting that any price rises could affect political stability in the country and reignite the protest movement.

In 1989, riots erupted in Maan when the government stopped subsidies on bread and spread to several southern cities inhabited by Eastern Bank Jordanians, the original Jordanians.

In recent years, the cost of living has risen sharply with consumer price inflation at 6.1 per cent by the end of 2010.

But salaries hardly kept up with inflation. In a sign that the cost of living is starting stretch the public's patience, 500 health ministry doctors resigned this month in Al Salt, in the north-west, to press the government to increase their salaries.

For now, the government is hoping to get foreign aid and oil with preferential prices from the Gulf.

The US president, Barack Obama, after meeting King Abdullah in Washington on Tuesday, announced that the US would raise around US$1 billion (Dh3.67bn) through the US Overseas Private Investment Corporation to help Jordan push ahead with its economic reforms. He also said the US would supply 50,000 tonnes of wheat "because of the huge spike in commodity prices throughout the world".

"All of this will help to stabilise the cost of living and day-to-day situation of Jordanians and will provide a foundation so that these economic reforms can move forward and long-term development can take place," Mr Obama said.

Jafar Hassan, Jordan's minister of planning and international co-operation, said the US loans would fund small and medium-sized projects over the next 10 years, according to the state Petra News Agency.

In his efforts to ease public frustration, King Abdullah heeded to some of the public demands when he sacked his prime minister in January.

He approved a 460 million dinar aid package in basic food subsidies and public servants received a 20-dinar salary increase.

In January, the government lifted the special six per cent tax imposed on kerosene and diesel and also reduced by sx per cent the tax on 90 octane gas to reach 12 per cent instead of 18.

smaayeh@thenational.ae

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I am in awe of the remarkable women in the Arab region, both big and small, pushing boundaries and becoming role models for generations. Emily Nasrallah was a writer, journalist, teacher and women’s rights activist

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