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Energy subsidy reform for growth and equity in Egypt: The approach matters

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  • Breisinger, Clemens
  • Mukashov, Askar
  • Raouf, Mariam
  • Wiebelt, Manfred

Abstract

Phasing out energy subsidies is high on the agenda of policymakers in several Middle Eastern and North African countries. The impact of such reform can vary widely depending on the country and policy. This paper contributes to the existing literature by examining the phasing out of energy subsidies in Egypt under alternative economic scenarios. In particular, we consider Egypt's short- and long-term economic adjustment under different assumptions on labor market flexibility, spending options of subsidy savings, and alternative social protection measures. Results from economy-wide model simulations suggest that energy subsidy cuts may hamper economic growth in the short term, but depending on the policy measure, will improve growth perspectives and household welfare in the longer term. Yet, findings also point to likely adverse impacts of the reform on household consumption in the short and longer run. To counteract such negative impacts, targeted social protection measures should be continued and scaled up in parallel with the phasing out of energy subsidies.

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  • Breisinger, Clemens & Mukashov, Askar & Raouf, Mariam & Wiebelt, Manfred, 2019. "Energy subsidy reform for growth and equity in Egypt: The approach matters," Energy Policy, Elsevier, vol. 129(C), pages 661-671.
    • Handle: RePEc:eee:enepol:v:129:y:2019:i:c:p:661-671
    DOI: 10.1016/j.enpol.2019.02.059
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    7. Shehabi, Manal, 2020. "Diversification effects of energy subsidy reform in oil exporters: Illustrations from Kuwait," Energy Policy, Elsevier, vol. 138(C).
    8. Boudekhdekh, Karim, 2022. "A comparative analysis of energy subsidy in the MENA region," MPRA Paper 115275, University Library of Munich, Germany.
    9. Alireza Ghadertootoonchi & Maryam Fani & Masoume Bararzadeh, 2020. "The effect of energy subsidies on the sustainability of economy, society and environment: A case study of Iran," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2020(2), pages 93-129.
    10. Jing Li & Lingling Song & Yanchun Zhu, 2020. "Subsidies, Clean Heating Choices, and Policy Costs: Evidence from Rural Households in Northern China," Sustainability, MDPI, vol. 13(1), pages 1-18, December.
    11. Belaïd, Fateh & Flambard, Véronique, 2023. "Impacts of income poverty and high housing costs on fuel poverty in Egypt: An empirical modeling approach," Energy Policy, Elsevier, vol. 175(C).
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    14. Mohammed Basheer & Victor Nechifor & Alvaro Calzadilla & Claudia Ringler & David Hulme & Julien J. Harou, 2022. "Balancing national economic policy outcomes for sustainable development," Nature Communications, Nature, vol. 13(1), pages 1-13, December.
    15. Guoge Yang & Feng Deng & Mingyue Du, 2024. "Research on the Asymmetric Influence of Non-R&D Subsidy and R&D Subsidy on Digital Enterprises Performance," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 14749-14786, September.
    16. S. Mauricio Medinaceli Monrroy & Marcelo G. Velázquez Bilbao La Vieja, 2023. "Hydrocarbon Prices and Subsidies in Bolivia 1986 - 2025," Development Research Working Paper Series 05/2023, Institute for Advanced Development Studies.
    17. Flavian Emmanuel Sapnken & Jean Gaston Tamba & Salome Essiane Ndjakomo & Francis Djanna Koffi, 2020. "Oil Products Consumption and Economic Growth in Cameroon Households: An Assessment Using ARDL Cointegration and Granger Causality Analysis," International Journal of Energy Economics and Policy, Econjournals, vol. 10(6), pages 510-523.
    18. Wang, Qunwei & Zhou, Bo & Zhang, Cheng & Zhou, Dequn, 2021. "Do energy subsidies reduce fiscal and household non-energy expenditures? A regional heterogeneity assessment on coal-to-gas program in China," Energy Policy, Elsevier, vol. 155(C).
    19. Shittu, Ibrahim & Abdul Latiff, Abdul Rais & Baharudin, Siti ‘Aisyah, 2024. "Assessing the compensation and reinvestment plans for fuel subsidy rationalization in Nigeria: A dynamic computable general equilibrium approach," Energy, Elsevier, vol. 293(C).

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