x Abu Dhabi, UAETuesday 25 July 2017

Power crisis threatens Jordan

Jordan's controversial plan to raise power prices next month for a second time this year is set to go ahead despite warnings such measures could lead to serious civil unrest.

Power costs in Jordan are already 10 times higher than Egypt and 20 times higher than Saudi Arabia. Above, the Hussein thermal power station in Zarqa. Muhammad Hamed / Reuters
Power costs in Jordan are already 10 times higher than Egypt and 20 times higher than Saudi Arabia. Above, the Hussein thermal power station in Zarqa. Muhammad Hamed / Reuters

Jordan's controversial plan to raise power prices next month for a second time this year is set to go ahead despite warnings such measures could lead to serious civil unrest.

Sabotage attacks on gas pipelines from Egypt - the energy source for 80 per cent of Jordan's electricity - are costing the government at least US$1 million a day, energy officials say.

In response, as it tackles paring down a $10.5 billion budget for this year, the government in Amman intends to raise the price of electricity by 15 per cent, having already doubled taxes on mobile phones to 16 per cent and to 24 per cent on mobile phone contracts.

Grappling with almost no natural resources and an external debt of more than $23bn, the kingdom is trying to reduce a $2bn fiscal deficit this year and at the same time tackle cuts in Egyptian gas supplies.

"Such wrong and uncalculated steps show that the government lacks a comprehensive understanding of the situation," Yusuf Mansur, the chief executive of the Envision Consulting Group in Amman, said yesterday.

Power costs in Jordan are already 10 times higher than Egypt and 20 times higher than Saudi Arabia, said Musa Saket, a board member of Jordan chamber of industry.

Mr Mansur said state coffers would ultimately be hit by another price rise. "When the government increases prices and taxes, the productivity and consumption of people will be affected and this will reduce government revenues.

"People, including government employees, will resort to strikes and protests and the government will be forced to borrow more or impose more taxes. It's a vicious circle," he said. "We are completely dependent on foreign aid and government economic policies have failed, at least in the past three years. I expect a very bad recession in the next stage."

A government decision last November to raise fuel prices, including household gas, by up to 53 per cent, sparked a wave of nationwide protests, with some calling for King Abdullah II to step down, which is punishable by imprisonment.

"When the government increases taxes and prices, citizens will wonder: 'Why are we paying that much and what for?' They are already complaining about bad government services," Jawad Anani, the president of Jordan's economic and social council, said.

"The government needs to be transparent with citizens about economic issues. Jordan needs clear plans and policies to address these problems, including energy, poverty and unemployment," said Mr Anani, a former deputy minister for economic affairs, warning that "otherwise people will hold more strikes and protests".

Jordan is home to more than 500,000 Syrian refugees, and Amman has repeatedly complained they are burdening the country's scarce resources, while calling for international aid.

"Regional instability, including the disruptions in Egypt's gas supplies and the Syrian refugees, is seriously affecting the budget," Muwaffaq Dmur, the head of parliament's finance committee, said yesterday.

"The government is being forced to increase prices and taxes to help save the economy and avoid bigger problems," he said.

But Khalil Attieh, the deputy house speaker and an independent member of parliament, disagreed.

"It's unacceptable … the government is just after people's pockets. I don't think people will accept that and remain silent."

In its national economic reform programme, the government said it would increase tariffs in a bid to end losses at the state-owned National Electric Power Company (Nepco), according to The Jordan Times.

Nepco lost an estimated at 1.19bn Jordanian dinars (Dh6.18bn) last year because of dependency on the imports of heavy fuel as a result of the frequent attacks on pipelines supplying natural gas from Egypt.

Reversing Nepco's demise is part of a medium-term strategy the government and the IMF agreed in April to enable the kingdom to take a $2.1bn loan from the fund.

In response to the proposed power price hikes, Fawzi Hammouri, the president of the private hospitals association, said hospitals would increase fees by 10 to 13 per cent to cover increased energy costs.

The foodstuff traders' association (FTA) also warned the price hike would push commodity prices up after Ramadan.

"It is consumers who will pay the price of the government decision," said the FTA board member Ghassan Khoury.

 

business@thenational.ae

* with AFP