Syria Curbs Fuel Subsidies
(22-Apr-08)
Syria Curbs Fuel Subsidies
(22-Apr-08)
The Syrian government is introducing rationing for the heating oil it makes available at subsidised prices. The move has been met by some criticism, but comes in the face of the rising cost of oil imports, and smuggling which is siphoning off much of the cut-price kerosene to other countries.
The scheme represents the first stage of a plan by the ministry of economy and trade to phase out subsidies for all petroleum products in the next five years.
The government estimates that subsidies this year alone will cost it seven billion US dollars – the equivalent of a staggering 19 per cent of gross domestic product.
All petroleum products used to be subsidised as part of the Baath party’s socialist economic policies, but that no longer seems sustainable. The country’s own oil reserves have depleted, and it now imports about 55 per cent of the petroleum products it consumes, as Prime Minister Naji al-Otari announced recently.
The government has said it will increase capacity at domestic oil refineries, but it also has contend with the separate problem of smuggling. Much of the cheap heating oil is not used by its intended beneficiaries, but is instead taken out covertly to neighbouring countries, Turkey in particular. Customs officers confiscated more than two million litres of kerosene from smugglers in the last four months of 2007 alone.
Government sources and economists say this has forced the authorities to revise the system.
Syrians are now lining up to collect the vouchers that will entitle each family to 1,000 litres of subsidised kerosene for the year. The government plans to distribute vouchers to 5.1 million families by April 26.
The government says 1,000 litres of heating oil should be enough to get people through even a cold winter. Oil minister Sufian al-Alaw said in a statement that 77 per cent of families use less than that amount in the course of a year.
A litre of kerosene currently costs about 7.20 lira, about 14 US cents. The government has not yet announced what the fuel will cost under the new scheme.
Some economists have praised the scheme, noting that the wealthy benefited from the old system because they could purchase unlimited amounts of kerosene at subsidised prices.
But others argue that parts of the new scheme are unfair, such as rules that all families are entitled to the same 1,000 litres regardless of how many members they have, and that some women will not be eligible.
Male heads of household, widows with children, and the oldest sons in orphaned families are allowed to claim vouchers, and there has been a storm of criticism from women’s rights activists who questioned why divorced, unmarried or widowed women living alone should be excluded.
“That is blatantly discriminatory against women, and it’s an irresponsible decision," said one women’s activist.
University students, too, are complaining that they are not entitled to any subsidised fuel even if they live far from the family home.
In the rural Al-Tal area outside Damascus, one resident said people there needed more heating oil than the average.
“The weather is very cold,” he said. “We definitely use more kerosene than people who live in the city of Damascus."
One economic analyst questioned the whole strategy, noting that ending subsidies on kerosene will have knock-on effects on every sector of the economy.
"Rising fuel prices will affect all economic activity in the country,” he said. “It's difficult to predict what the short-term results will be."
He was also critical of another government pledge – to increase public-sector wages to offset the rising petroleum costs – saying this would merely stoke inflation.
"Every salary increase is accompanied by a rise in the price of all goods,” he said. “But that isn’t the point. We have a socialist system and the government is liberalising the economy regardless of whether people’s standard of living are ready for that or not.”
(Syria News Briefing, a weekly news analysis service, draws on information and opinion from a network of IWPR-trained Syrian journalists based in the country.)
The scheme represents the first stage of a plan by the ministry of economy and trade to phase out subsidies for all petroleum products in the next five years.
The government estimates that subsidies this year alone will cost it seven billion US dollars – the equivalent of a staggering 19 per cent of gross domestic product.
All petroleum products used to be subsidised as part of the Baath party’s socialist economic policies, but that no longer seems sustainable. The country’s own oil reserves have depleted, and it now imports about 55 per cent of the petroleum products it consumes, as Prime Minister Naji al-Otari announced recently.
The government has said it will increase capacity at domestic oil refineries, but it also has contend with the separate problem of smuggling. Much of the cheap heating oil is not used by its intended beneficiaries, but is instead taken out covertly to neighbouring countries, Turkey in particular. Customs officers confiscated more than two million litres of kerosene from smugglers in the last four months of 2007 alone.
Government sources and economists say this has forced the authorities to revise the system.
Syrians are now lining up to collect the vouchers that will entitle each family to 1,000 litres of subsidised kerosene for the year. The government plans to distribute vouchers to 5.1 million families by April 26.
The government says 1,000 litres of heating oil should be enough to get people through even a cold winter. Oil minister Sufian al-Alaw said in a statement that 77 per cent of families use less than that amount in the course of a year.
A litre of kerosene currently costs about 7.20 lira, about 14 US cents. The government has not yet announced what the fuel will cost under the new scheme.
Some economists have praised the scheme, noting that the wealthy benefited from the old system because they could purchase unlimited amounts of kerosene at subsidised prices.
But others argue that parts of the new scheme are unfair, such as rules that all families are entitled to the same 1,000 litres regardless of how many members they have, and that some women will not be eligible.
Male heads of household, widows with children, and the oldest sons in orphaned families are allowed to claim vouchers, and there has been a storm of criticism from women’s rights activists who questioned why divorced, unmarried or widowed women living alone should be excluded.
“That is blatantly discriminatory against women, and it’s an irresponsible decision," said one women’s activist.
University students, too, are complaining that they are not entitled to any subsidised fuel even if they live far from the family home.
In the rural Al-Tal area outside Damascus, one resident said people there needed more heating oil than the average.
“The weather is very cold,” he said. “We definitely use more kerosene than people who live in the city of Damascus."
One economic analyst questioned the whole strategy, noting that ending subsidies on kerosene will have knock-on effects on every sector of the economy.
"Rising fuel prices will affect all economic activity in the country,” he said. “It's difficult to predict what the short-term results will be."
He was also critical of another government pledge – to increase public-sector wages to offset the rising petroleum costs – saying this would merely stoke inflation.
"Every salary increase is accompanied by a rise in the price of all goods,” he said. “But that isn’t the point. We have a socialist system and the government is liberalising the economy regardless of whether people’s standard of living are ready for that or not.”
(Syria News Briefing, a weekly news analysis service, draws on information and opinion from a network of IWPR-trained Syrian journalists based in the country.)
