Jordan revamps cabinet in push to speed up economic reform

Reuters News
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Posted: Aug 21, 2013 2:21 PM
Jordan revamps cabinet in push to speed up economic reform

By Suleiman Al-Khalidi

AMMAN (Reuters) - Jordan's Prime Minister Abdullah Ensour announced a cabinet reshuffle on Wednesday which bolstered the grip of technocrats charged with speeding up IMF-guided economic reforms crucial to rejuvenate sluggish growth.

The move, affecting 14 portfolios, left the key interior, finance and foreign ministers in place.

Political analysts say the new 23-member cabinet strengthens the role of technocrats at the expense of tribal figures who held sway in previous administrations.

This applied to most of the crucial service ministries such as water, planning, tourism, housing, information technology and transport, they said.

"It's a mainly technocratic cabinet without a political bent and with a priority to proceed with IMF-directed reforms and overhauling the subsidy budget," said Mohammad Abu Ruman, a leading political commentator.

Reform-minded Ensour, an economist educated in the United States and France who was reappointed to his post in March, was mandated by King Abdullah, to accelerate economic reforms seen as crucial to meet the U.S.-allied country's challenges.

Jordan has been hit by a financial crisis since the start of a wave of revolts elsewhere in the Middle East over the past two years as foreign aid fell due to economic problems in donor countries while welfare payments soared.

Jordan has seen street protests, which prompted the authorities to expand social spending and freeze fuel price hikes, but as the country came close to the brink of financial insolvency last year it signed a $2 billion locan deal with the IMF. The deal was conditional on budget tightening and unpopular cuts in fuel subsidies and hikes in electricity tariffs.

Ensour has faced criticism from the conservative establishment that dominates parliament, accusing him of a pro-Western reform agenda that promotes harsh IMF-dictated cuts in subsidies that will worsen the plight of lower-income households and the poor.

Independent politicians have praised Ensour's willingness to take bold measures in the face of popular resistance.

SUBSIDY CUTS

Ensour's decision last November to cut subsidies on most fuel products sparked violent protests. Jordan was spending nearly $2.3 billion annually on subsidies, almost a quarter of its annual budget.

The new cabinet is expected to continue a shift from broad subsidies towards targeted cash transfers to the poor to bring down the country's chronic deficit.

Finance Minister Umayya Toukan, who won praise from the IMF for the country's fiscal performance in the past year when it cut the deficit to 5 percent of gross domestic product from 7.5 percent in 2012, is a strong advocate of fiscal measures to reduce years of overspending by successive governments.

Economists say the deficit could reach as high as 10 percent without aid from Western donors and Saudi Arabia.

Officials say electricity tariffs will be increased early next year.

The kingdom's economy has been strained by a flood of refugees from the more than two-year-old civil war in its northern neighbor Syria.

Jordan has received around 500,000 Syrian refugees, equivalent to 7 percent of its own population, putting pressure on water and electricity resources.

However, in recent months there have been signs of economic recovery with foreign reserves boosted by at least $1.5 billion of Gulf money, pushing the reserves up to around $10.7 billion, and with investors showing rising confidence in Jordan's economy, officials say.

The economy grew 2.7 percent last year, low growth for a developing economy, and the IMF projects growth above 3 percent this year.

(Editing by Susan Fenton)