Jordan opts for cash payments rather than subsidies for the Kingdom's poorest

Jordan opts for cash payments rather than subsidies for the Kingdom's poorest
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Published September 3rd, 2012 - 11:35 GMT via

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Authorities plan to introduce direct cash payments to deliver subsidies to targeted segments of Jordanians in next year’s state budget, a government official said Sunday.

Recent government decisions to raise the prices of fuel products were aimed at minimising the cost of supporting oil derivative prices on the Treasury, which is set to suffer an estimated deficit of over JD1 billion this year, the official told The Jordan Times.

Late Friday, authorities decided to raise the price of 90-octane gasoline from JD0.70 per litre to JD0.77, a 10 per cent rise, and the price of diesel from JD0.515 per litre to JD0.55. The price of 95-octane gas, which used to be sold at JD1 per litre, also went up by 1.5 per cent or 15 fils.

Friday’s announcement was the second round of price increases in about four months.

The official, who preferred to remain unnamed, said that over the past two years, decision makers were confused over selecting the best mechanism to deliver subsidies to the poor and medium-income Jordanians, with two options on the table: smart cards or direct cash payments.

“Cash transfer is the easier to implement,” said the source, who explained that funds will be allocated in next year’s state budget for this purpose.

Minister of Industry and Trade Shabib Ammari told a group of businesspeople recently that he was in favour of direct cash payments and that he was working “hard” to convince the ministerial team to support such a system.

Describing the current blanket subsidy system as a “disaster” as “it opens the door for corruption” and creates additional financial burdens on the Treasury, Ammari noted that delivering government support to those who really need it would help remove a lot of flaws in the economy and any blemishes related to prices in the local market.

According to official figures, the cost of the subsidy bill for a full year as of September 1, after the latest fuel prices update, is set to reach JD525 million.

The International Monetary Fund, which has recently approved a $2.05 billion loan (36-month stand-by arrangement) for Jordan to help address budgetary and payment imbalances, has always urged authorities to carry out reforms to the subsidy system. 

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