Jordan ends bread subsidy, doubling pita prices

Jordan said on Friday that a decision to end subsidies on staple pita bread will take effect on Saturday, the first such step in over two decades to ease the country’s budget woes.

The price of a kilo of white pita bread was raised 60 percent to 0.40 dinars ($0.50) from 0.25 dinars ($0.30) and price of large pita bread nearly doubled.

Other types of bread that most middle-class Jordanians consume are not affected.

The government has put in place a mechanism to offset the effect on the poor by cash transfers.

Trade Minister Yarub Qudah announced the new prices at a news conference on January 8, saying that prices would be locked until the end of 2018 as the kingdom has sufficient reserves of wheat.

The government would save about 50 million Jordanian dinars ($70m) in subsidies that used to amount to around 120 million dinars ($170m) annually, the Jordan Times daily cited Qudah as saying.

Asked how the government would issue the cash transfers to compensate the poor, Qudah said that low paid civil servants would receive cash subsidies with their salaries.

Other eligible citizens would receive the support quarterly or biannually by subscribing to a government site, the Jordan Times reported.

For those without bank account, the government will choose a bank where beneficiaries can receive the subsidies any time of the year, the daily said.

The price rise, which takes effect after midnight on Saturday, is the first major rise since 1996. A move to raise prices then sparked civil unrest when the government was forced to push for it to comply with International Monetary Fund (IMF) requirements for extending new credit.

This week’s move comes 10 days after Jordan’s cabinet announced a major package of IMF-guided tax hikes it says are crucial to gradually lower record public debt needed to get the economy hit by regional conflict growing again.

Although the IMF did not request lifting bread subsidies this time, the fund has long said Jordan’s ability to maintain a costly subsidy system was increasingly untenable in the absence of large foreign capital inflows or infusions of foreign aid.

Prime Minister Hani al-Mulki said the delay in implementing the much-needed reforms to generate extra revenues would increase the already high financing needs and threatens to hit the country’s finances.