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IMF says Jordan price hike 'important step'

Jordanian protesters from opposition parties wave the national flag during a demonstration against the government's decision to lift fuel subsidies in the capital Amman, on November 19, 2012. AFP PHOTO/KHALIL MAZRAAWI

AMMAN: The IMF said on Wednesday Jordan's decision to raise fuel prices by up to 53 percent last month was "an important step," despite violent protests in which three were killed and more than 70 injured.

"Despite this challenging environment, the authorities have been implementing sound macroeconomic policies aimed at reducing fiscal and external imbalances in a socially acceptable way. The removal of general subsidies on all fuel products ... was an important step," it said in a statement.

"It reduced costs and risks to the budget from fluctuations in oil prices. Introducing targeted transfers at the same time mitigated the impact of fuel price increases for a large part of the population."

Jordan insists the price hike was "unavoidable" given the country's $5-billion (3.9-billion-euro) budget deficit, and that the measures would save $42 million by year end.

The country relies on imports for 95 percent of its energy needs and has been struggling to find affordable alternatives to Egyptian gas supplies, which have been repeatedly hit by sabotage.

Amman has said Cairo resumed this month full gas supply of 250 million cubic metres (8.8 billion cubic feet) a day.

"Jordan performed well under the programme in 2012. The country has faced challenges during the year from the disruption of the flow of natural gas, the ongoing conflict in Syria, and an acceleration of influx of refugees," the IMF said.

"Combined with higher oil and food prices and a shortfall in grants, this has put further pressure on the country's economy. Nonetheless, growth is expected to increase slightly to 3 percent compared with 2.6 percent in 2011."

Following a December 3 to 20 visit to Jordan, the IMF expected average inflation to be around 5 percent for the year.

The IMF said it plans to discuss with Jordan a 2013 plan to help address issues like hosting more 250,000 Syrian refugees who have fled the unrest in their homeland.

"This programme will include specific policy measures that would help Jordan to reach its programme objectives and address the key challenges it faces, including the large inflow of Syrian refugees," it said.

 

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