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Jordan’s king blocks unpopular low-grade fuel price hike

Jordanian deputies gather outside the the House of Representatives after boycotting a session to object to the government's decision to raise fuel prices, in Amman September 2, 2012. (REUTERS/Muhammad Hamed)

AMMAN: Jordan’s King Abdullah has blocked a hike in the price of the low-grade fuel used by the poor in the aid-dependent kingdom, which is struggling to absorb refugees from neighboring Syria.

The planned price hike, which sparked scattered street protests by the government’s tribal and Islamist opponents, would be the second this year under International Monetary Fund-guided measures to cut subsidies and ease budget strains.

Palace officials said Monday the king had asked Prime Minister Fayez al-Tarawneh’s government to freeze the 10 percent rise in the price of lower-grade gasoline.

Sunday, 89 of the 120 deputies in the country’s lower house of parliament signed a petition urging the king to dismiss Tarawneh over the move, which took effect Saturday.

However, Jordan’s finances have been weakened by higher welfare spending to buy social peace during the Arab Spring, and by the cost of caring for refugees from Syria.

Jordanian officials say the government needs to show budget discipline to keep IMF support.

“There is no government in the world that wishes to raise prices but the interest of the national economy has forced us to deal with the issue of subsidies with our existing resources,” Tarawneh was quoted as saying Sunday, before the monarch’s decision to freeze the hike.

Since street clashes in the depressed south of the country that erupted after price hikes in 1989 and 1996, Jordanian governments have been reluctant to raise fuel prices.

Protests early last year, inspired by the wave of Arab unrest, pushed the authorities to expand social spending and freeze fuel price rises. But the government later raised them.

The authorities say maintaining subsidies on energy, including cylinder gas widely used for cooking and diesel, would cost it around $700 million this year, part of a wider $2.3 billion subsidy bill that includes bread, electricity and water.

State salaries consume most of the $9.6 billion annual budget.

The IMF agreed to a $2 billion three-year stand-by arrangement last July and Jordan’s government has sought to cut its deficits by an austerity drive that also raised electricity prices, imposed higher taxes on luxury goods and raised corporate taxes on banks and mining companies.

Jordan hopes to keep the deficit to around 5 percent of gross domestic product this year despite higher social spending and a soaring oil bill after the disruption of Egyptian gas imports that support 80 percent of the country’s electricity generation.

This forced the kingdom to switch to much more expensive imported diesel to cover its electricity needs.

 
A version of this article appeared in the print edition of The Daily Star on September 04, 2012, on page 5.

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