Subsidy cuts – lessons from Jordan

The swingeing fuel subsidy cuts imposed by Jordan's government a year ago have, so far at least, made few inroads in narrowing the country's fiscal deficit. Measures to replace subsidies have tended to overcompensate households, probably due to concerns about the social unrest that may otherwise have resulted, and leave the fiscal position vulnerable to high oil prices. Nonetheless, Jordan's experience with subsidy reform provides some useful lessons for other countries in the region, particularly Egypt.