Cost of bread doubles in Jordan as subsidies lifted


Amman —- Jordan on Saturday increased the price of bread by up to 100 percent after lifting subsidies on the staple in a bid to redress its debt-riddled economy.

The move is expected to affect low income Jordanians, for whom flat pitta-like bread is an essential part of meals.

Past price hikes have sparked riots in the cash-strapped country which has few natural resources.

The price of a kilo of white bread was raised by 100 percent from 16 piastres to 32 piasters ($0.45), while the price of smaller flat bread rose by more than 67 percent.

Flat bread known as "taboon", a staple on the dinner tables of low-income Jordanians, rose 90 percent.

The price of other breads remained unchanged.

The official Petra news agency, quoting the trade and industry ministry, said the new prices will remain in effect until Dec. 31.

"This decision will undoubtedly affect Jordanians," said shopper Ahmad Ramadan as he queued at an Amman bakery.

"Someone paid 300 dinars ($423) a month who spends a dinar a day on bread will end up having to allocate 30 dinars a month for bread alone," he said.

"Everything will increase, even the price of sandwiches. God help everyone," he said.

Abdullah Al-Hamawi, head of the union that represents around 1,700 bakeries across the country, said Jordanians consume some "eight million loaves of bread a day and 16 million in winter".

Jordan has a population of 9.5 million, 6.6 million of whom are Jordanians. The others include refugees from the wars in Syria and Iraq and Palestinians.

The country has a public debt of some $35 billion, equivalent to 90 percent of its gross domestic product.

The government decided earlier this month to raise the prices of bread and fuel and increase value added tax on goods including cigarettes, fizzy drinks and jewelry.

It hopes to increase tax revenues by $761 million, and has pledged a "financial aid" package to struggling families affected by the price hikes.

On Tuesday, the finance ministry began compensating low-income families, allocating each member 27 dinars ($38) for the year.

Last year, price rises affecting an array of goods and services sparked protests during which there were calls for the cabinet to resign.

In 2016, Jordan secured a $723-million three-year credit line from the International Monetary Fund to support economic and financial reforms.

Protests also erupted in 2012 after the government cut fuel subsidies to secure an IMF loan. That loan was intended to rein in a budget deficit that threatened the country's fiscal and monetary stability.

The authorities have been saying bread subsidies were benefiting foreign workers and Syrian refugees living in the country and the money that was saved would be given to Jordanians in cash transfers.

The government says bread prices — among the cheapest regionally — had encouraged waste. It expects the move will reduce consumption.

The bread move comes 10 days after Jordan’s cabinet announced a major package of IMF-guided tax hikes it says are needed to gradually lower public debt and rejuvenate an economy hit by regional conflict.

Although the IMF didn't seek lifting bread subsidies this time, it has long said Jordan’s costly subsidy system was increasingly untenable without large inflows of foreign capital or foreign aid.

Tax hikes and subsidy cuts — highly unpopular — have been forced on the government as the country’s debt-to-gross-domestic-product ratio has reached a record 95 percent, up from 71 percent in 2011.

After an IMF standby arrangement that brought some fiscal stability, Jordan agreed last year to a more ambitious three-year program of long-delayed structural reforms to cut public debt to 77 percent of GDP by 2021. The debt has grown at least in part because successive governments have adopted expansionist fiscal policies characterized by job creation in the bloated public sector and by lavish subsidies for bread and other staple goods. — Agencies