Evaluating energy subsidies in the arab world 24 3. In the united states, subsidies have enabled some industries to operate at a net cumulative loss, serving as a drain on public resources. Abstract this paper examines the short and longrun economic impact of egypts energy subsidy reform in july 2014 without and without compensating transfers for the bottom 40 percent of the income distribution and the decline in global energy prices, as well as the longrun impact of phasing out the energy subsidies over a 5 year period. Adenauer, isabell, 2008, p olicies to protect the poor from risin g energy and food prices in.
Energy subsidies and the world trade organization asil. Egypt had aimed, for a substantial part of 2012, to cut its energy subsidies by up to a third over the coming year as part of an ambitious plan to reform the economy. Energy subsidies may be direct cash transfers to producers, consumers, or related bodies, as well as indirect support mechanisms, such as tax exemptions and rebates, price controls, trade restrictions. More recently, the secretary of energy requested updated.
Recent developments in egypts fuel subsidy reform process. Government subsidies for particular forms of energy have long influenced producers investment choices and consumers consumption patterns in ways that affect both international trade and the environment. The theme of energy subsidies in egypt has long been a subject of contentious debate for both economic and political reasons. Prepared by david coady, ian parry, louis sears, and baoping shang1 may 2015 abstract this paper provides a comprehensive, updated picture of energy subsidies at the global and regional levels. Egyptera s u b s id y c o s t financial year 201220 the egyptian government has spent on the subsidy the same value that has been spent on education, health. Energy subsidies will fall from approximately egp 61 billion in the 201516 fiscal year to egp 35 billion in 201617, he said. The 14th cairo climate talks event saw a lively discussion on the growing demand for energy in egypt in light of its limited supply, and highlighted the necessity and challenge of reforming current energy subsidy policies.
Egypts government is taking bold steps to liberalize the energy sector gradual phasing out of subsidies 100% by 2015, currently a burden on the budget, gradual market deregulation implement and activate strong regulatory bodies encourage strong involvement of private sector investmentand foreign direct. The context for reform until now, expenditure on fuel subsidies in egypt has increased dramatically, growing at a compound annual growth rate of 26 per cent between 2002 and 20. Energy subsidies are measures that keep prices for consumers below market levels or for producers above market levels, or reduce costs for consumers and producers. Beginning in 2014, the energy sector management assistance program esmap, through its energy subsidy reform facility. Energy subsidy reform in egypt cairo climate talks. In egypt, the poorest 40 percent of the population receive 3% of gasoline subsidies, 7% of natural gas subsidies, and 10% of diesel subsidies. The government of egypt reformed prices of electricity and petroleum fuels several mes over the course of the 2000s, but rising interna onal oil prices meant that fossil fuel subsidies increased drama cally over the last dec. But energy subsidies also go to firms, and mainly to those in the energy intensive sectors. Egypt will reduce subsidies on petroleum products by almost 43 percent in the 20162017 budget, finance minister amr algarhy said at a news conference saturday, according to reuters. An energy subsidy in any government actionthat concerns primarily the energy sectorand that lowers the costs of energy production, raises the price received by energy producers or lowers the price. Egypt will slash its total subsidy bill in the new budget by 14 percent in the coming fiscal year 201617 compared to the current fiscal year. Reform of energy subsidies in egypt 4 e nergysub idw o tc h l2 05.
Evaluating egypts renewable energy and energy subsidies. The political economy of energy subsidies in north africa. This reportan update based on fiscal year fy 2016 data and earlier eia reports on direct federal financial interventions and subsidies in energy marketscontinues a series of u. Relatively organized demonstrations by workers and the. Subsidies of petroleum energy products in egypt, eces working paper 145, cairo, egypt. In july 2014 egypt introduced longawaited energy subsidy cuts. Energy subsidies in the middle east and north africa. Recent developments in egypts fuel subsidy reform process 2 2. It focuses on the broad notion of posttax energy subsidies, which arise when. In recent months the world trade organization wto has seen increasing conflict over the rules for government support of the energy sector. Solving egypts energy subsidies crisis egyptian streets. A subsidy is a benefit given to an individual, business or institution, usually by the government. Egypt aims to cut energy subsidies, raise food subsidies.
Energy subsidies in egypt significantly contributed. Subsidies can close the gap between cost and wtp iea. The political economy of energy subsidies in egypt and tunisia. Subsidies share in the government of egypt expenditure reached 25.
Egypt business pushes sisi for energy subsidy cuts reuters. Energy information administration eia reports 1 that began in response to congressional requests. Introduction the egyptian government, like many of the countries in the mena region, has employed relatively large energy subsidies for decades, justified as a means of augmenting the incomes of lower income and middle class households through low cost energy services. Energy subsidy cuts finally providing relief for egypt. Successive egyptian governments have always been reluctant to alter the core structure of the subsidies since it may result in social unrest and antagonism among the poorer classes. Reviewing, reforming, and rethinking global energy. Nevertheless, subsidies share in the government budget started in increase again since 2005 james, 2015. Egypt to slash total subsidy bill in 201617 economy. In 20 and 2015, energy subsidies thus amounted to nearly 16 and 10 per cent of egypts gdp respectively. Key findings of arab future energy index 2017 by regional center for renewable energy and energy efficiency rcreee december 11, 2019 4. S gvm p a petroleum corporation egpc that keeps prices of oil and gas below the price that the government pays to the foreign partners involved in the production of oil and gas in egypt.
For example, despite several reforms in yemen, pretax energy subsidies still amounted to about 6 percent of gdp in 2011 and exceeded public capital investment. This paper examines the short and longrun economic impact of egypts energy subsidy reform in july 2014 without and without compensating transfers for the bottom 40 percent of the income distribution and the decline in global energy prices, as well as the longrun impact of phasing out the energy subsidies over a 5 year period. Egypt aims to cut subsidies on fuel by about 26 percent to le 89. Recently, the egyptian government introduced a number of reforms to address the targeting and quality of subsidized bread. Energy subsidies also divert public resources away from spending that promotes more inclusive growth figure 4. In fact, the majority of studies on the welfare effects of energy subsidies have confirmed that upper middle and high income groups enjoy the lions share in energy subsidies. The imf estimates egypts energy subsidies amount to three times what it is the spending on education and seven times the expenditure on. Pdf energy subsidies in the middle east and north africa. What i can say on the fuel subsidies is that we are following the plan outlined by the president and the government to phase out subsidies on major fuel products over 3 years, the imfs director of communications gerry rice said in a press briefing on june 8, 2017 when asked about the targets for egypts fuel subsidy bill in fy201718. Economic brief reforming energy subsidies in egypt. This is a partial measure since it does not cover electricity and since it is. While energy subsidies have never been cheap in egypt, the costs soared after the 2011 uprising as egypt transitioned from a net exporter to a net importer of energy, and oil prices peaked as a result of political turmoil in mena. These had been in the pipeline for over five years, but had been repeatedly delayed.
Oil minister ahram online, saturday 11 nov 2017 a female employee poses with a fuel pump at a petrol station in cairo, egypt, february 24, 2016. Yet, the report inevitably has to deal with other definitions of subsidies, in particular when it comes to the description. Similarly, in countries such as egypt, jordan, and yemen, energy subsidies represent government expenditures far greater than those directed at health and education elkatiri and fattouh, 2015. Egypt plans energy subsidies reduction tuesday, 10th april 2018 the egyptian government plans to reduce subsidies of petroleum products by 26% and electricity subsidies by 47% in the annual budget for the 20182019 fiscal year fy, amwal al ghad reported.
In 20 and 2015, energy subsidies thus amounted to nearly 16 and 10 per cent of egypt s gdp respectively. Can fuel subsidy reforms in egypt reduce budget deficit. How can political connections help in capturing the energy. With fossil fuel subsidies being a major contributor to the countrys deficit, energy subsidy reform was a strategic priority for the government of egypt. This paper examines the short and longrun economic impact of egypts energy subsidy reform in july 2014 without and without compensating transfers for the bottom 40 percent of the income distribution and the decline in global energy prices, as well.
Egypt business pushes sisi for energy subsidy cuts. Ghada barsoum abstract food subsidy programs are a key component of egypts social policy. The cost of fuel imports has soared since egypt floated its pound currency in november. Energy subsidy reform in egypt egyptian electric regulatory agency september 2014 egyptera prepared by. The poorest quintile of the population in egypt, jordan, lebanon, and iran receive 1%8% of energy subsidies, compared to 38%86% accruing to the richest quintile imf, 2014. Egypt aims to cut energy subsidies, raise food subsidies in 201819. Egypts efforts to chip away at a daunting budget deficit have taken hold, with cairo reporting that the government spent about 30% less on fuel subsidies during the first half of this fiscal year. More specifically, as heba saleh from the financial times wrote in october.
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