GOJ TO PARTIALLY ELIMINATE FUEL SUBSIDIES JULY 9

C O N F I D E N T I A L AMMAN 005451

SIPDIS

E.O. 12958: DECL: 12/29/2014
TAGS: EPET ENRG EAID EFIN PGOV PREL JO
SUBJECT: GOJ TO PARTIALLY ELIMINATE FUEL SUBSIDIES JULY 9

REF: AMMAN 5228

Classified By: Charge d'Affaires David Hale for reasons 1.4 (b) and (d)


1. (C) In Charge's initial courtesy call on recently
appointed Finance Minister Adel al-Kodah on July 7, Minister
Kodah stated that the Council of Ministers had finalized its
decision to raise fuel product prices. In its first session,
on July 5, the Cabinet had set July 9 as the date on which
the price rise would go into effect. (NOTE: In a separate
conversation with Charge, King Abdullah noted that the price
rise would be announced on the evening of Friday, July 8, to
take advantage of the news cycle and minimize the initial
posibility of disturbances.)


2. (C) Minister Kodah explained that the price rises would
vary according to the fuel product in question, and gave the
rises as follows:
Gasoline would increase by 10.6%
Diesel would increase by 30%
Kerosene would increase by 33.3%
Fuel oil for electricity would increase by 33%
Fuel oil for industry would increase by 59.1%
Jet fuel for Royal Jordanian Airlines (RJ) would increase by
47.9%
Jet fuel for carriers other than RJ would increase by 7%
Fuel for ships would increase by 7.7%
Cooking gas would increase by 7.7%
(NOTE: Post has faxed historic price list to NEA/ELA and
EB/ENR - reftel)


3. (C) To help ameliorate the effects of these price
increases on the poorest Jordanians, Minister Kodah said that
the GOJ plans to delay the end of the subsidy on bread and to
hold the price of electricity constant for the poorest
consumers who utilized less than 160 kilowatt hours per
month. In addition, the GOJ plans to give a stipend of JD 10
($14) per month to those earning less than JD 100 ($140) per
month and JD 5 ($7) per month to those earning between JD 100
($140) and JD 300 ($420) per month. (NOTE: It was unclear
from the discussion whether these stipends would go to all
Jordanians or to GOJ employees; past GOJ practice would
indicate the latter.) In the longer term, the Ministry of
Finance is working to restructure the National Aid Fund to
better target those most in need of it.


4. (C) Minister Kodah noted that he planned two further
rises: one to take place by March 1, 2006, in which the
subsidies on the majority of fuel products would be
eliminated entirely, and one to take place by March 2007, in
which the subsidies on the remainder of fuel products
(including kerosene and cooking gas) would be eliminated.
HALE