AMMAN: Jordan has raised the price of petrol and electricity for major mining firms, hotels and banks as part of International Monetary Fund-guided austerity steps to ease its worsening budget deficit that could reach $4 billion this year.
Yesterday's move was the first major rise in retail petrol prices since street protests early last year pushed authorities to expand social spending and freeze fuel price rises, including petrol.
The price of premium petrol has been increased almost 20 per cent while electricity tariffs have been substantially raised for major industrial and service sectors.
Prices of bulk LPG, heavy fuel oil for industry, jet fuel and bunker fuel were also raised in a move economists say will add to inflationary pressures and hurt the country's exports competitiveness by pushing costs.
The government has not raised the price of lower grade petrol used by lower-income people, the majority of the seven million population.
Successive governments have adopted an expansionist fiscal policy characterised by sizeable subsidies and salary increases in response to protests.
Authorities also created new state jobs in an already bloated public sector, and maintained subsidies for bread and other staple goods, further straining public funds.
In the latest sign of discontent, Islamist and tribal opposition groups held street protests against rising prices on Friday.
Officials say the focus on taxing Jordan's wealthy and big corporations while avoiding any moves to raise prices of subsidised gas cylinders for cooking or electricity for lower income households will ward off any troubles.
Officials say the price rises will show a serious commitment to fiscal consolidation and win the IMF continued support and further aid.
An IMF team raised with officials at a meeting last month the prospect of the country facing a bleak economic plight if authorities fail to contain the public sector wage bill and restore fiscal prudence.
The cabinet announced long-planned electricity tariffs for key corporate sectors, including banking, a pillar of the economy, a move that will hit struggling businesses, already reeling from the slowdown.
A senior official said that the government also planned to raise taxes on banks, mining firms and large corporations, along with higher taxes on luxury items.
The moves, seen as appeasing protesters demanding a fight against corruption and angry at a widening gap between the rich and poor, were criticised by a business community reeling under heavy direct and indirect taxes.
They say such moves will scare investors, reduce business activity and growth which has halved in the last few years from six to 7pc during a boom period until 2008 will offset any gains from higher taxes.
The budget deficit has been accentuated by a soaring energy bill that hit $4.5bn last year.