Syria hikes key price subsidy after Tunisia events

Syrian authorities sharply raised a key subsidy on Sunday in a reversal of policy after Tunisia's president was driven from power by unrest over soaring prices, unemployment and state repression.

The Syrian government, which has been controlled by the Baath Party since it took power in 1963, announced it had increased the heating oil allowance for public workers by 72 percent to the equivalent of $33 a month.

The government had hitherto been slashing subsidies as it lifts bans on private enterprise to try and repair decades of economic stagnation and draw back capital.

In neighbouring Jordan, the state announced a $225 million package of cuts in the prices of several fuels and staple products including sugar and rice.

Syrian Finance Minister Mohammad al-Hussein said the increase in the heating oil allowance would cost the state $326 million a year, benefiting two million public workers and retirees out of a population of 20 million.

"This liquidity will have a positive impact on economic activity," Hussein told Syria's official news agency.

The government slashed heating oil subsidies three years ago, prompting an outcry from farmers whose costs rose because the fuel is also used in transport and agricultural pumps.

Subsidies on fertilisers were removed last year, despite opposition from the government-backed General Peasants Union. The agriculture minister said the move curtailed corruption.

The government gave out coupons worth 10,000 Syrian pounds ($217) last winter to make up for higher heating oil prices. But a year later, the subsidy was delayed as complaints surfaced about graft in distribution and the government went about setting up an assistance fund specifically for the needy.

Many could not afford to wait. In areas bordering the occupied Golan Heights, forests are being cut down illegally as people switch to cheaper wood-fired stoves, witnesses say.

Economic policy is a rare area where public criticism has been traditionally permitted in Syria. But debate was curbed in recent years and independent figures who faulted policy and graft were jailed on charges of "weakening national morale".

In its scant coverage of events in Tunisia, Syria's state-run media have focused on the disorder since President Zine al-Abidine Ben Ami's flight to Saudi Arabia.

The al-Watan newspaper said in an editorial on Sunday that Ben Ali was toppled because he was too close to the West.

"The guarantor of stability is people sticking with their leadership. This is the experience of Syria, whose leadership has been always on the side of the aspirations of the people," the newspaper remarked.

But government officials have acknowledged that the gap between rich and poor has widened in Syria. Unemployment is officially around 10 percent, while independent estimates put the figure as high as 25 percent.

Experts say drought and mismanagement of water resources have hit large areas of eastern Syria, which produces all of the country's 380,000 barrels per day of oil, and deepened poverty.

Since violent protests by minority Kurds in 2004, Syrian authorities have stressed that stability is their priority, pointing to solid economic growth figures, the limited impact of the global financial crisis on Syria, and a state that still provides free education and health care.

The International Monetary Fund expects Syrian inflation to remain steady at 5 percent this year, with economic growth rising slightly to 5.5 percent.