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Jordan hikes gasoline, power prices to ease budget deficit

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Jordan has raised the price of gasoline and electricity for major mining firms, hotels and banks, to ease its worsening budget deficit that could reach $4 billion this year, officials said on Saturday.

May 27, 2012 11:47 by



Jordan has raised the price of gasoline and electricity for major mining firms, hotels and banks, to ease its worsening budget deficit that could reach $4 billion this year, officials said on Saturday.

The move, announced by the cabinet, which takes effect after midnight is the first major rise in retail gasoline prices since street protests early last year inspired by the wave of Arab unrest pushed the authorities to expand social spending and freeze fuel price hikes, including gasoline.

The prices of premium petrol would increase to 1 dinar ($1.4) from 0.795 dinars per litre – almost 20 percent – and electricity tariffs have also been substantially raised for major industrial and service sectors of the economy, including banks and hotels.

The government, mindful of public fury that exploded into street clashes in the depressed south of the country after two price hikes in 1989 and 1996, has not raised lower grade ordinary gasoline prices used by lower-income Jordanians – the majority of the country’s seven million population.

Successive governments have adopted an expansionist fiscal policy characterised by sizeable state subsidies and salary increases in response to the months of protests.

To head off greater unrest, the authorities also created new state jobs in an already bloated public sector, and maintained subsidies for bread and other staple goods, further straining public funds.

In the latest sign of popular discontent, Islamist and tribal opposition groups held street protests against rising prices on Friday.

Jordanian officials say the price hikes will show a serious commitment to fiscal consolidation and win the International Monetary Fund’s (IMF) continued support and further aid.

The cabinet also announced long-planned electricity tariffs for certain sectors including banking, a pillar of the economy, a move that will hit the country’s struggling businesses, already reeling from the slowdown.

The budget deficit has been accentuated by a soaring energy bill that hit $4.5 billion last year after the disruption of regular Egyptian gas imports that support 80 percent of Jordan’s electricity generation.

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

Economists said Jordan’s ability to maintain a costly subsidy system and a large state bureaucracy, whose salaries consume the bulk of the $9.6 billion of state expenditure, was increasingly untenable in the absence of large foreign capital inflows or infusions of foreign aid.

Officials say the rise in gasoline prices along with fiscal prudence and restraint will help Jordan meet an IMF-backed budget deficit target of around 6 percent of gross domestic product after grants that traditionally cover budget shortfalls.

WHO STOLE THE REVOLUTION?

Shafiq used strikingly similar language at a news conference in which he addressed youth groups that spearheaded last year’s revolt. For many, he represents everything they want changed.

“Your revolution was stolen,” Shafiq told them. “I pledge to return its fruits to your hands.”

He said “the clock cannot be turned back”, but that he would not let Egypt “drown in chaos”.

Much of his rhetoric indirectly targeted the Brotherhood, playing on fears among Egypt’s minority Christians and secular liberals that a Mursi presidency would threaten their freedoms.

“No exclusion of anyone or distancing of anyone,” Shafiq declared. “Everyone has a right to be a part of this nation.”

On Friday he told Egyptian television he saw no problem with the idea of a Muslim Brotherhood-led government if he were elected president.

The generals who took over when Mubarak quit on Feb. 11, 2011, have promised to make way for a new president by July 1, formally ending a messy and often bloody political transition.

But the military, the source of all Egypt’s past presidents, is keen to keep its privileges and influence, preferably enshrined in a new constitution. Political wrangling has held up the drafting process, so the next president will take office not knowing his powers or those of parliament and government.

Shafiq has won support among Egyptians who see him as the kind of strongman they feel the country needs to end 15 months of political instability, economic failure and rising crime.

Although Mursi topped the poll, his score was unimpressive compared to the Brotherhood’s performance in the parliamentary election in which it gained nearly half the seats.

WOOING RIVALS

Reform-minded independents such as Abol Fotouh and Sabahy between them won more votes than either Shafiq or Mursi, hinting at the growth of a new centre in Egypt’s fluid political scene.

“The Brotherhood will have to reach out in a grand and dramatic way to the centre and the other political parties if they have any hope of winning their support and any hope of winning the presidency,” said Elijah Zarwan of the European Council on Foreign Relations think-tank.

Some of the potential partners in an anti-Shafiq front will demand a political price.

The secular Justice Party, formed after last year’s uprising, expressed “deep sorrow” at the result and set tough terms for the Brotherhood to win its support in the run-off.

It demanded a presidential system, whereas the Brotherhood favours a stronger parliament, called for a secular vice-president and said the Islamist movement must formally register itself for the first time in its 84-year-old history.

Long a thorn in Mubarak’s side, the Brotherhood has looked increasingly isolated from other parties since his fall, first facing accusations it was slow to join the revolt and then that it acquiesced in the military rule that followed.

Trust in the Brotherhood eroded further when it reversed a pledge to stay out of the presidential race. The group, founded in 1928, says it is the target of a smear campaign.

Former U.S. President Jimmy Carter, whose Carter Center was among several foreign and local organisations that monitored the first-round vote, said procedures appeared to have been fair.

“I have confidence in this process, despite the fact that it’s been confused on occasion,” he told a news conference.

However, the Center’s preliminary report noted some procedural irregularities and lack of secrecy for voters in some polling stations.

“The election authorities prohibited access (for monitors) to the final aggregation of national results, undermining the overall transparency of the process,” it added.

(Additional reporting by Marwa Awad, Shaimaa Fayed and Tom Pfeiffer; Writing by Alistair Lyon and Tom Pfeiffer; Editing by Andrew Heavens)



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