Cash Subsidies Missing the Mark – Report

A significant number of poor Jordanian households are losing out because the targeting mechanism for the Kingdom’s cash subsidy program isn’t accurate enough, an Identity Center report said.

The report by the development think tank found that the targeting method, which relies on reported household income instead of per capita income, was problematic because poorer households generally have a greater number of children and dependents than wealthier families. This means that 10 percent of needy households wouldn’t be eligible to receive the cash transfer because their combined household income exceeds the JD10,000 cutoff mark agreed upon in 2013.

A further criticism made by the report is that the cash payment scheme has resulted in an increased fiscal burden for the government instead of generating savings. “The total value of transfers exceeded the value of subsidies that were already in place,” said the report, also noting the additional administration costs of the subsidy reform program.

The report further looks at the historical context of subsidies in Jordan dating back as far as 1921, and provides an analysis of the restructuring of subsidy reforms, particularly focusing on reforms in the last decade.

Subsidies in the Kingdom have traditionally provided substantial reductions in the cost of energy and food, offering citizens relief from high commodity prices. Yet in recent years, under pressure from the International Monetary Fund (IMF), Jordan has begun scaling back subsidies and restructuring the way they’re allocated.

The report is part of a series produced by the Identity Center’s Jordan Independent Economy Watch project, an independent program that seeks to engage a variety of stakeholders and encourage dialogue with the government on their economic reforms.