Jordanian bread security subject to demands of the IMF

Jordanian bread security subject to demands of the IMF
Jordanian bread security subject to demands of the IMF
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The government returned again to talk about removing subsidies for bread. The government said that it has new mechanisms that will “ensure the delivery of support to those who deserve it,” amid warnings from economists against removing subsidies and other appeals to apply changes gradually.


The changes, endorsed by the Finance Committee of the Jordanian Parliament and the senate finance committee, would raise the price of bread to about 40 qirsh, while compensating back to citizens a sum about equal to their purchases at the end of each year.


The government justifies the changes with the explanation that subsidizing bread materials costs the treasury about 180 million dinars each year. While Jordanians benefit from this support, so do expatriates, foreign workers and other residents of the Kingdom.


Prime Minister Abdullah al-Nasour said at the launch conference for the Jordan 2025 development blueprint that the government will work on liberalizing the price of bread through the use of smart cards. The government will be raising the price of bread bought by all residents and citizens of the Kingdom to the same price and will then use the e-card to calculate the value difference to return, either in value or with government support, to the citizen on an annual basis.


According to al-Nasour, while the support which is now offered benefits all members in the Kingdom, the rate of bread waste is extremely high because of the cheap price.


The government did not disclose more details about the plan for the removal of subsidies, while available information suggests that they have completed the preparations and are waiting to determine their future relationship with the International Monetary Fund. The government recently authorized the Minister of Finance to communicate with IMF management in order to determine the future of the relationship with Jordan.


The chairman of the bakery owners, Abdullah al-Hamwi, confirmed that the support of the union went to the government for the lifting of bread subsidies, to be implemented gradually and without affecting citizens.


Al-Hamwi said that the union submitted a proposal to the government that included raising the price of a kilo of bread to a quarter of a dinar, and thus the government has reduced the value of its support by almost half, pointing to the need to support those who deserve it, without exception.


The government did not talk about the proportion of the removal of subsidies, whereas the Prime Minister spoke at the press conference about a full lifting of support, and it did not speak about payments like electricity.


While the economic and social analyst Hussam Ayesh warned about the removal of subsidies alone, he pointed out that the gradual lifting of them helps measure the effectiveness of the decision, its applicability and its endurance.


Ayesh said that the removal of bread subsidies is part of a program agreed upon with the International Monetary Fund which comes as a continuation of last year’s “trial balloon.”


Ayesh stressed the need to take into account the economic status of individual citizens, and he pointed to the difficulty of estimating the size of a family’s needs in terms of the actual substance of bread materials.


He expressed concern that removal of subsidies on bread could become a new topic of national debate, and that this could have great social consequences.


The head of the House Consumer Protection Committee, Bassem Kiswani, warned against any rise that may occur in the price of bread because of the negative impact on low-income citizens.


Kiswani said that the problem is that there is no guarantee from the government to find a mechanism that provides real support and no way to know the true cost of raising the prices.


In the opinion of the expert economist Khaled Zubaidi, changing bread prices is a positive step. He pointed out that justice can be done in the support of distributors who deserve it, such as low-income business owners.


Zubaidi referenced the need for the government to exit the wheat and bread materials sector, stating that the purchase of wheat and flour is the private sector, while the government provides support for the poor and eligible according to the price of wheat.


The remaining scenarios provide support in the case of raising the price of bread. This is the most important, as in the past the majority of Jordanians who had experience with government support received coupons, cash or other support which were marred by many gaps that deprived some while supporting others who did not deserve it.


It is worth taking note that this is not the first time that the government has discussed removing subsidies for bread. However, it faced strong opposition as the topic of bread is a sensitive issue for citizens, specifically when the government recalls the events witnessed in the Kingdom in the year 1996, which came to be known as the “bread revolution,” when the government of Abdul Karim Kabariti rose the price of bread and sparked a wave of protests in the various governorates of the Kingdom.


*The Arabic of this article appeared on May 13, 2015

Translated by Julia Norris

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