VZCZCXRO3466
RR RUEHROV
DE RUEHAM #0296 0290548
ZNR UUUUU ZZH
R 290548Z JAN 08
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC 1641
INFO RUEHXK/ARAB ISRAELI COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC

UNCLAS AMMAN 000296 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ELA AND EEB 
TREASURY FOR SETH BLEIWEIS 
 
E.O. 12958: N/A 
TAGS: EFIN ECON ENRG PGOV EAID JO
SUBJECT: JORDAN'S SUBSIDY-FREE 2008 BUDGET PASSES LOWER HOUSE OF 
PARLIAMENT 
 
REFS:  A) AMMAN 26 
       B) 07 AMMAN 4575 
   C) 06 AMMAN 1986 
 
¶1. (U) On January 24, Jordan's lower house of parliament approved 
the 2008 budget by a vote of 87-11, with three abstentions and nine 
absentees.  Three days of discussion in the parliament focused on 
the impact of financial reform, particularly the end of fuel 
subsidies, on limited income citizens.  Parliamentarians expressed 
fears about security and stability.  The Senate will now debate the 
draft budget law and upon its passage by the Senate, the law will be 
signed by King Abdullah and published in the Official Gazette (Ref 
B).  The lower house's vote was taken using the new, USAID-funded 
electronic voting system which went online with this session of 
parliament.  (This system is designed to increase transparency by 
recording votes and discussions so civil society and media can 
better track and engage decision-makers on issues.) 
¶2. (U) The largest change in the 2008 budget from that of 2007 is 
the elimination of subsidies for petroleum products such as 
kerosene, diesel, LPG, and fuel oil.  While subsidies for gasoline 
were previously eliminated, prices are nevertheless scheduled to 
rise an additional 20 percent on February 1 (Ref C).  Per liter, the 
price of regular fuel will increase from 315 fils ($.41) to 499 fils 
($.70), unleaded from 640 fils ($.90) to 742 fils ($1), super from 
605 fils ($.85) to 702 fils ($.99), and diesel from 315 fils ($.44) 
to 515 fils ($.73).  As a result, prices for premium and unleaded 
fuel will be higher than international market prices, with the 
excess revenue used to fund pay raises for civil servants.  The 
price of LPG will also rise, but due to unseasonably cold weather, 
the GOJ will maintain a temporary subsidy for the gas canisters. 
The current canister price of LPG JD4.25 ($6) will initially rise to 
JD7.5 ($10.56) and to JD 10 ($14.10) in April. 
¶3. (SBU) Lower house members further urged the government to tighten 
its belt as the country faces $10.9 billion in foreign debt and an 
increasing government budget deficit.  In response, parliament's 
financial committee called for cuts of $98 million in capital 
expenses and $70 million in current expenses, but Ministry of 
Finance (MOF) Secretary General Ezz Eldeen Kanakria informed 
EconCouns January 28 that the proposed expenditures, approximately 
6.2 percent of GDP, would not be changed. 
 
¶4. (U) Parliamentarians also supported efforts to develop, and 
budgeted $421 million for, a social safety net which the government 
intends to use to offset the rising costs of living.  Prime Minister 
Nader al-Dahabi told parliament that the government also plans to 
exempt further goods from taxation to help citizens cope with rising 
prices, continuing an early January decision to lift customs duties 
and exempt taxes on 13 basic commodities (Ref A). 
 
¶5. (SBU) The 2008 budget includes increased salaries for 550,000 
public servants and pensioners, retroactive to the beginning of the 
year.  Kanakria commented that the raise approved by parliament 
exceeds the MOF's proposal, but is not fiscally impossible.  Civil 
servants who earn $420/month or less will receive a $70/month raise. 
 Those earning more than $420 will receive a $63 raise.  Pensioners 
will receive a $42/month increase and National Aid Fund recipients 
will receive an additional $14 monthly.  The government also said 
that 440,000 citizens with annual per capita income below $1400 will 
also benefit from additional financial assistance, but no details 
were provided. 
 
¶6. (U) The budget of the central government will reach $7.3 billion 
or 42 percent of projected GDP.  A budget supplemental will be 
needed to address the $91 million expense of fuel subsidies for 
January 2008.  Budget annexes for independent bodies of the 
government could add an additional $1 billion.  70 percent of the 
budget is for current salaries; 10 percent is for retirees; 11 
percent for debt repayment, and 9 percent is earmarked for physical 
and human infrastructure including education, health, IT 
initiatives.  The GOJ currently employs about 30 percent of Jordan's 
labor force. 
 
Visit Amman's Classified Website at 
http://www.state.sgov.gov/p/nea/amman 
 
RUBINSTEIN