Austerity rescue plan could be saving Jordan

Austerity rescue plan could be saving Jordan
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Published June 18th, 2012 - 08:45 GMT via SyndiGate.info

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Cabinet members underscored that the recent economic decisions were aimed at correcting loopholes in the state’s finances
Cabinet members underscored that the recent economic decisions were aimed at correcting loopholes in the state’s finances
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Jordan Development Zone Company
,
Jafar Hassan
,
Samih Maaytah
,
Alaa Batayneh
,
Suleiman Hafez
,
Shabib Ammari
,
Jordan Press Association
,
Development Zones Commission

The government on Saturday said that the economy has started showing signs of recovery, thanks to a series of austerity measures that saw hikes in fuels and prices of other commodities. Cabinet members underscored that the recent economic decisions were aimed at correcting loopholes in the state’s finances. At a press conference organised by the Jordan Press Association, the Cabinet economic team underlined that the measures were aimed at minimising the government’s subsidies of several commodities, including fuel derivatives and electricity prices. Ministers of media affairs, planning, trade, energy and finance Samih Maaytah, Jafar Hassan, Shabib Ammari, Alaa Batayneh and Suleiman Hafez, respectively, were present at the press conference.

The ministers stressed that the recent austerity measures were not imposed by an outside party on the Kingdom; rather, the government was compelled to take these decisions to address imbalances in economic policies and to put the financial situation back on the right track. Despite the economic corrective decision package, said the officials, the government’s bill of subsidies is expected to amount to more than JD2 billion by the end of the current year, stressing that the measures taken are expected to save more than JD300 million. “Although we have started to see some positive signs, the economic situation is still harsh as we are yet to receive the promised assistance from the donor community and the international assistance,” Hafez said. He added that the government’s measures have been received with satisfaction by countries who have been supporting the Kingdom and has also sent a positive message to investors willing to invest in the country. For his part, Ammari underlined that the recent measures were taken after thorough and in-depth discussions with all stakeholders in the private sector in order to ensure that the lower and middle classes are not affected. He added that representatives from the industry and trade sectors showed understanding and promised not to increase the prices of the essential items to address the effects of the government’s austerity measures.

“The majority of the industrial sector, whose monthly consumption is less than 2,000 kilowatt hour, was not affected by the recent increase on the electricity prices, while the increase on medium-size enterprises was less than 4.8 percent of what they used to pay,” the minister said. Meanwhile, Ammari announced that mega-projects valued at more than JD200 million will soon be implemented at the Dead Sea by Arab and foreign investors after the government, last month, approved the signing of an agreement to improve the Dead Sea Development Zone. The agreement, signed between the Development Zones Commission and the government-owned Jordan Development Zone Company, entails the implementation of infrastructure projects on the shores of the Dead Sea to attract investments and tourists, Ammari said. He added that in the coming two weeks, he will present to the Cabinet a new investment draft law which is expected to stimulate and encourage foreign and local investment (see separate story).

According to Batayneh, the government does not buy oil from any destination at preferential prices, adding that the government imports oil from Iraq, according to a joint agreement, at $5 less than the market price after adding the cost of insurance and transportation to the bill. The minister noted that the flow of Egyptian natural gas since the beginning of the year has not been stable, adding that this pushed the government to look for alternatives to offset the shortage in the gas that constitutes the main supply for electricity generation plants. “On average, the daily supply of Egyptian gas was never more than 24 million cubic feet as opposed to 300 million cubic feet stipulated in the agreement we had signed,” the minister said, adding that at times the flow dropped to zero.

Moreover, Batayneh underlined that the government’s consumption of fuel derivatives increases by 5.5 percent annually and its consumption of water and electricity increases by 7.5 percent, which he said are among the highest rates according to international standards. The minister stressed that the recent hike in the prices of octane-90 and octane-95 was consistent with a previously adopted mechanism which calculates additional costs to the oil prices on international markets, adding that the government is ready to reconsider prices should international oil prices drop.

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