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French Version

New fuel price hike looming

News reports emerged this week claiming that Prime Minister Adnan Badran privately told a group of lawmakers that his government would hike fuel prices in Jordan at the beginning of July.

Badran’s alleged remarks stirred wide controversy among Jordanians, especially since the government continued to officially deny that a date has been fixed for the raise.

Badran himself recently told reporters that his government would not project any further hikes on fuel prices until he consults members of the parliament first. Since the parliament is adjourned and will not summon before the first week of July, local analysts regarded those reports as “a political maneuver” in the continuous standoff between the government and the parliament.

Badran made it clear that his government has a specific policy to cut its subsidies on fuel products on an annual basis until 2008, when fuel products will be priced in Jordan free from any projected financial backing. Economists, meanwhile, agreed that the government has no option other than raising the fuel prices, in view of the rising oil prices in world markets and the Kingdom’s scarce oil supplies from neighboring countries. Cabinet sources indicated recently that Jordan was promised from the Arab Gulf countries to receive annual financial aid estimated at JD 200 million, rather than supplying the Kingdom with oil products. The sources indicated that Arab Gulf states would supply Jordan with its needs of oil products at world market’s prices, as it used to for the last two months, after Saudi Arabia stopped its grant of 50,000 barrels of oil a day, on April 30. According to the government, Jordan’s oil bill in the first four months of this year stood at JD 363 million, about 60 percent more than the same period of last year. As the lawmakers get ready for the extraordinary session in three weeks time, many of them remained silent over the government’s reported intention to raise fuel prices.

Only president of the Lower House’s Financial and Economic Committee, Deputy Hashim Dabbas expressed his support to the government, saying that it should have been done a long time ago. “If the government does not raise the fuel prices this July, I believe it would face financial problems and, eventually, it would affect the Kingdom’s national interests,” Dabbas said. However, he realizes that the government’s decision would have a negative impact on the citizens, but maintained that such a decision “aims at protecting the achievements that Jordan has made in terms of social and economic development.” The government’s Spokesperson Asma Khader denied that the government has fixed a date for the forthcoming hike on fuel prices, but confirmed that such hikes are planned periodically for the coming two years. “The hikes on fuel prices are an essential demand for the government,” Khader told reporters recently, adding, “The government is now evaluating the expected impacts of these hikes on the people, and would enhance the social development programs to make sure that such impacts would not threaten the social structure.”

Finance Minister Bassem Awadallah was quoted by Reuters recently while saying that the high oil prices “are causing Jordan major fiscal problems”, and hopes the government will overcome these problems “through a combination of domestic measures and additional assistance from donor countries.” Prior to the US-led invasion of Iraq, Jordan used to receive annual oil supplies from Iraq estimated at 5.5 million tons, most of it under preferential prices and the rest as grants. Since the Invasion of Iraq in April 2003, Jordan has had to rely on oil supplies from some Arab Gulf states. Awadallah was not certain that Jordan would get further oil grants from the Gulf States, but maintained that the government is facing mounting expenses regarding its subsidies of fuel prices, as these subsidies were increased from the projected JD 310 million in 2005 budget to JD 425 million in the first four months of this year.

On the legislative part, lawmakers preferred not to deepen their dispute with Badran, opting to delay until expected consultations on the eve of the parliament’s extraordinary session. Dabbas said that he was reassured by delegates from the International Monetary Fund, who visited Jordan recently, that any delay in projecting the rise in fuel prices means further economic drawbacks.

“They have warned me of the recurring of the 1989 economic crisis,” Dabbas said. The IMF delegates also asked the government to end its subsidies of some services and to raise taxes, as alternatives to reduce deficit in the budget. “It is feared that any projected hike on fuel prices would not only affect the citizens but also entail further impact on the economic sectors in the Kingdom,” said economist Ibrahim Seif.

“Many industries in Jordan rely on energy produced by oil, especially the services sector, in which Jordanians mainly count on in their daily living.” Seif told The Star that the government is working on a study with a group of local and foreign experts to scrutinize the potential steps to ensure better relief for the poor and underprivileged, who would be affected by the fuel price hikes.

He did not elaborate, but Seif said the experts would soon present a comprehensive report to the government on that regard. “The study is not made for public, as it aimed at streamlining efforts by the National Aid Fund and other social development programs to support the poor with direct financial assistance,” he explained. Amidst the debate over the looming rise in fuel prices, Awadallah said the national economy proceeds in “buoyant performance” this year, and said the economy would exceed the 5 percent level in growth.

He attributed this to the rising exports, increased tax revenues, the surge in property sales and construction, the tourism boom and healthy services sector.

Amman,06 27 2005
Ghassan Joha
The Star
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