Jordan Times
By Ramsey G. Tesdell
and Hugh Naylor
AMMAN — Last year, Mahmoud Ibrahim was earning a modest living selling bread and
sweets at his Raghadan bakery. But things have changed: Business has taken a
turn for the worse this year, stripping him of the income he needs to feed and
clothe his family.
Ibrahim, a father of six young daughters and a 13-year-old boy, is one of many
Jordanians experiencing the side effects of a price increase on oil-based
fuels.
“I had to raise my prices to 200 fils for a pastry. I used to sell them for 150,
even 100 fils, if people bargained,” he said, adding that raising his prices has
failed to compensate for hike in the cost of cooking gas over the past year.
Gas cylinders now cost JD4.25 each, compared to JD3.25 in 2005.
“My rent’s JD300 a month… but I’m not making enough to pay for it,” he said.
The spike in oil-based fuel prices is a consequence of a plan by the ministries
of finance and energy and mineral resources to reform the energy sector.
Announced in 2004, the plan aims to wean the Kingdom off subsidies that have
placed a huge burden on the state budget due to soaring international oil
prices and the loss of preferential rates from Saudi Arabia and Iraq, which
used to provide Jordan with 5.5 million tonnes annually before the March 2003
US-led invasion.
According to Ezzeddin Kanakria, assistant secretary general at the Ministry of
Finance, the treasury is currently paying around JD250 million annually in
subsidies.
“But for every $1 increase in the price of a barrel of oil,” he said, “it costs
the treasury an additional JD35 million.”
The elimination of subsidies will relieve the government of this onus and “allow
the Jordanian market to compete on the international market,” Mahmoud Al Ees,
director of the planning department at the Ministry of Energy and Mineral
Resources, told The Jordan Times. “The people will be paying the market price
for oil products.”
The initiative, originally projected to occur under a phased lifting of
subsidies over a four- to five-year period, has apparently been accelerated to
take place over a two-year timeframe. The final removal, according to Kanakria,
is slated to occur sometime early this year.
But Ibrahim, who has never heard of a government plan to remove subsidies, said
he had been forced to take drastic measures to heat his home and feed his
family.
“I sold off my wife’s jewellery to get money, but it’s not enough,” he lamented.
“I’m now JD5,000 in debt to my neighbours. I am forced to borrow — my family
depends on it.”
The effects of the reforms and an apparent lack of advertising of the
programme’s timetable and objectives have drawn scrutiny from economists and
members of civil society.
Yusuf Mansur, a local economist, said the enormous financial burden of the
“elimination of oil grants from Iraq and Saudi Arabia” and a simultaneous
increase in “world oil prices” — once assumed by the government — is
effectively being passed on to citizens as subsidies are lifted.
He believes the government’s reform initiative has not given enough
consideration to the economic welfare of citizens in the Kingdom, which hosts
roughly 850,000 people living under the poverty line and an unemployment rate
of 15.5 per cent, according to government figures.
“Has the government been clear about fuel subsidies and prices? No,” said
Mansur. “Has there been enough public debate on this subject? I don’t think so.
Has the government clearly announced the breakdown of prices and aid? Again, the
answer is No.”
The reform initiative is taking a heavy toll on Abu Ahmad, a 43-year-old truck
driver from Aqaba.
“It’s affected me a lot. It costs me JD8 every three days to heat my house,” he
said, adding it was an increase of around one-third of what he was paying a
year ago.
Even though his house in Aqaba requires less kerosene to heat compared to colder
areas of the country, Abu Ahmad said escalating fuel costs are depriving him of
income for his five children.
“It’s harder to feed my children, even if I work all day and all night,” Abu
Ahmad told The Jordan Times, adding that he receives no financial assistance
from the government.
“I’m considering making a move to Dubai to find better paying work,” he said.
In order to offset some of the side effects of this programme, the government
intends to set aside JD65 million in next year’s budget. “These cash subsidies
for families will be available to help them accommodate the higher prices,”
Kanakria said. He did not elaborate further.
Despite repeated attempts to contact the concerned ministries, The Jordan Times
was unable to obtain detailed information of the compensation strategy.
But Mohammad Obeidat, president of the National Society for Consumer Protection,
said the system to disperse funding to low-income families is confusing and may
not be enough to dampen the effects of a surge in the price of oil derivatives,
particularly in light of increasing demand resulting from the influx of up to
800,000 Iraqis.
“There is no real organised system to promote and bring special assistance
programmes to the people,” Obeidat told The Jordan Times. “It’s very
complicated… People don’t understand it; I don’t understand the system,” he
added.
For Ibrahim, government policy was of little concern — his thoughts were with
his family in Ruseifa and his struggling bakery business. “I receive JD75 a
month from the government, but it doesn’t cover my needs or my family’s
needs... I’m not sure what I’m going to do.”