Jordan has raised the price of lower grade gasoline, used by the poor, by 12.9 percent two weeks after a substantial hike in prices of premium gasoline as part of IMF-guided austerity steps to ease a worsening budget deficit, officials said on Wednesday.

The move, announced by the cabinet, took effect after midnight and is the first rise in lower grade gasoline prices at the pump since street protests early last year inspired by the wave of Arab unrest pushed the authorities to expand social spending and freeze fuel price hikes, including gasoline.

Two weeks ago the price of premium petrol was increased by 20 percent while electricity tariffs have also been substantially raised for major industrial and service sectors of the economy, including banks and hotels.

The government had also hiked prices of bulk LPG, heavy fuel oil for industry, jet fuel and bunker fuels in a move economists say will add to inflationary pressures in the country of seven million people and hurt its exports competitiveness by increasing costs.

The government has long been mindful of public fury that exploded into street clashes in the depressed south of the country after two gasoline price hikes in 1989 and 1996 but has been forced to take measures to stem a widening budget deficit that threatens to worsen the country's economic plight.

Successive governments have adopted an expansionist fiscal policy characterised by sizeable state subsidies and salary increases in response to the months of protests for reforms. - Reuters