Jordan ends bread subsidy, doubling some prices, to help state finances

(MENAFN- The Peninsula) AMMAN: Jordan said a decision to end subsidies on staple pitta bread that will lift its prices by between 60 and 100 percent 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 pitta bread was raised 60 percent to 0.40 dinars from 0.25 dinars and prices of large pita bread were 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 impact on the poor by cash transfers.

The move, which takes effect after midnight, 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 requirements for extending new credit.

The bread 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 lifting bread subsidies were not asked by the IMF 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.

$1=0.7090 dinars

(Reporting by Suleiman Al-Khalidi; Editing by Matthew Mpoke Bigg)

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