Government officials say the price rise on Wednesday is an attempt to limit a record budget deficit that was caused by spiralling oil prices.

The government endorsed at a cabinet meeting late on Tuesday a 5% to 29% price increase, effective at midnight, on a range of petroleum products including petrol, kerosene, cooking gas and fuel oil.

 

It was the second increase in two months.

The kingdom, which depends on energy imports for most of its needs, raised the price of petrol by 5.4%, kerosene by 22%, and cylinder gas used for cooking and heating by 7%.

The price of diesel, also widely used for heating purposes, was raised 22%, officials said.

Fuel oil for industries was increased 29%, while rates for supplies used for electricity generation were kept unchanged to maintain household power rates.

Aviation fuel was also raised by 23%.

Budgetary imbalances

"The dramatic developments in the oil markets that exceeded all expectations have caused huge imbalances and unbearable and acute pressures on the budget," Prime Minister Adnan Badran was quoted as saying in the press.


"The dramatic developments in the oil markets that exceeded all expectations have caused huge imbalances and unbearable and acute pressures on the budget"

Adnan Badran,
Jordanian prime minister

Officials said it had been no longer possible to defer a decision, because the cost of subsidising petroleum prices at current oil prices would reach 656 million dinars ($925 million), against a budgeted 310 million dinars, in the 2005 budget.

The move is fraught with risks in a country with high unemployment, where in past years civil unrest has broken out after steep petrol price rises, analysts said.

The government threw out a plan for more gradual price increases that would have led to full energy price liberalisation by 2007.

Loss of aid

Jordan's 2005 budget was thrown into disarray in April, when Saudi Arabia ended a 50,000 barrel-per-day oil grant to compensate for the loss of cheap Iraqi energy supplies Jordan relied on before the US invasion of Iraq in 2003.

Traditionally, the kingdom's budget shortfalls are covered by large infusions of foreign aid to maintain the stability of the US ally.

In addition to the loss of the Saudi grant, Washington scaled down aid to Jordan to half the nearly $1 billion given to offset the impact of the US-led war in Iraq on its economy.

Opposition warnings


Opposition and Islamist politicians and deputies said popular discontent was a warning to the conservative government that its radical free market reforms were unpopular.

"The Jordanian people should not pay for the mistakes of successive governments who are to blame for this budget deficit," said Zuhair Abu al-Ragheb, an Islamist deputy.

Deputies have criticised a plan to compensate poor people for the higher petrol prices by one-time $70 cash disbursements.