By Omar Obeidat
AMMAN – The International Monetary Fund (IMF) and former finance ministers on Thursday warned that the government should not continue with its subsidy regimes, stressing the need to direct support to the most vulnerable groups of the society.
Following a lecture delivered by Paul Cashin, adviser at the IMF Middle East and Central Asia Department and head of the fund’s mission to Jordan, on the regional economic outlook, experts highlighted that policy makers should consider a less costly alternative to across-the-board price subsidies by restricting the support to the segment of people who deserve it.
Pointing out to the measures Jordan has taken in response to regional unrest and the sharp increase in international oil and commodity prices, such as tax cuts on fuel and foodstuffs, more subsidies, and increased civil service salaries and pensions, Cashin said these fiscal measures will have an annual additional cost on the preexisting subsidies by 2.1 per cent of the gross domestic product (GDP).
Stating that the impact of higher fuel and foodstuff prices will cost Jordan 1 per cent of the GDP, the IMF official suggested that the government should go back to the monthly update of fuel prices to reflect international oil prices on local oil derivative prices.
“If these things continue, subsidy of food and oil, the overall budget deficit will be around 6.8 per cent,” of GDP, Cashin said.
Categories: Asia, Economics, Jordan, Middle East