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Sun 2 Sep 2012 12:57 PM

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Jordan hikes petrol prices for second time this year

Government raises price of lower grade gasoline by 10 percent in austerity measures

Jordan hikes petrol prices for second time this year

Jordan has raised the price of lower grade gasoline, used by the poor, by 10 percent in the second hike this year as part of IMF-guided austerity measures to cut costly subsidies, officials said on Saturday.

The move, which was announced by the cabinet and took effect after midnight, leaves unchanged the price of premium petrol since a major price hike last May.

The government then raised premium gasoline by 20 percent in the first such move since street protests early last year inspired by the wave of Arab unrest that pushed the authorities to expand social spending and freeze fuel price hikes, including gasoline.

It was followed a month later by a 12.9 percent rise in lower grade gasoline used by lower-income Jordanians - the majority of the country's seven million population.

The government, mindful of public fury that exploded into street clashes in the depressed south of the country after two price hikes in 1989 and 1996, has long been reluctant to raise fuel prices.

Jordanian officials say the price hikes will show a serious commitment to fiscal consolidation and win the International Monetary Fund's (IMF) continued support and further aid.

Economists have said Jordan's ability to maintain a costly subsidy system and a large state bureaucracy, whose salaries consume the bulk of the US$9.6bn of state expenditure, was increasingly untenable in the absence of large foreign capital inflows or infusions of foreign aid.

Officials say the rise in gasoline prices, along with fiscal prudence and restraint, will help Jordan meet an IMF-backed budget deficit target of around 5 percent of gross domestic product after grants that traditionally cover budget shortfalls.

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