Jordan Times
Monday, September 19, 2005
Social Safety Net to protect
limited-income groups from adverse effects of fuel price hike
AMMAN (Petra) — The government intends to create a Social Safety Net to protect
limited-income groups from the adverse effects of the partial reduction of
subsidies on oil derivatives, Prime Minister Adnan Badran said on Sunday.
In remarks at a meeting with Senate President Zeid Rifai and senators yesterday,
the premier said the government would subsidise prices of commodities for the
underprivileged to the tune of JD241 million annually.
Breaking down the figure, he said the total subsidy consists of JD60 million for
the National Aid Fund, JD38 million for salary increases that will go into
effect at the end of September, JD10 million for the daily meals benefiting
around quarter of a million students in underprivileged areas, JD55 million for
subsidising animal feed and JD60 million to provide free medical treatment to
the poor.
The prime minister noted that the government plans to compensate for the
increase in fuel prices by giving JD50 in a one-time cash payment to citizens
and retired civil servants and military personnel who earn less than JD400 a
month. The payment, which will cost the Treasury JD18 million, is to be
distributed before the Holy Month of Ramadan, expected early October.
He reiterated that the government would increase the price of fuel this month as
part of its efforts to stem a forecast budget deficit of around JD722 million by
the end of the year due to rising oil prices on the international market and the
drop in foreign aid.
Badran stressed that the price of bread and electricity would not be affected by
the hike in fuel prices, pointing out that he had instructed the Ministry of
Industry and Trade to maintain controls on the market prices.
Badran said dramatic developments in oil prices this year, with the price per
barrel of oil reaching $70, had placed “unbearable pressures on the state
budget,” forcing the government to increase fuel prices.
The hike entails a 5 per cent increase in the price of gasoline, while diesel
and kerosene will go up by 20-22 per cent.
Ministry of Finance figures estimate the international price per barrel to be
around $60 over the next four months, which means the average price per barrel
for this year would be around $55. This figure means a forecast budget deficit
of JD597 million or 6.7 per cent of the gross domestic product. With the
addition of JD50 million spent on medical treatment and JD75 on appropriations,
the deficit would amount to JD722 million.
The prime minister said the hike was part of the country's plan to fully
liberalise the energy sector by 2007 through a gradual lifting of fuel
subsidies.
He added that the government is directing its attention towards the feasibility
of extracting oil from oil shale and gradually moving to relying on gas for
industrial purposes, a step that would eventually reduce the Kingdom's oil bill.