Energy Subsidies in the Middle East and North Africa: Lessons for Reform (IMF)

Energy subsidies are widespread across the Middle East and North Africa (MENA), accounting for about half of global energy subsidies. While these subsidies provide some support to poor consumers, their benefits go mainly to the better-off. They also weigh on government budgets at the expense of much-needed investment in health care, education, and infrastructure; tend to encourage capital-intensive industries to the detriment of employment-intensive activities; and foster overconsumption and damage to the environment. For these reasons, subsidy reform with careful planning and compensatory measures can have big payoffs in terms of higher growth and greater equity.