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Quasi-fiscal Deficits in the Electricity Sector of the Middle East and North Africa: Sources and Size

Author

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  • Daniel Camos-Daurella
  • Antonio Estache
  • Mohamad M. Hamid

Abstract

The annual electricity investments needed in the Middle East and North Africa region to keep up with demand have been estimated at about 3 percent of the region’s projected gross domestic product. However, in most economies of the region, the ability to make those investments is limited by fiscal and macroeconomic constraints. This paper demonstrates that the solution is readily available: by improving the management and performance of the region’s utilities, more than enough resources could be freed up to make the investments needed. The paper presents the first evaluation of the size and composition of the quasi-fiscal deficit associated with the management of the electricity sector in 14 economies in the Middle East and North Africa region. The estimations are for 2013. They show that the average quasi-fiscal deficit is 4.4 percent of gross domestic product (but goes down to 2.9 percent if Lebanon, Djibouti, Bahrain, and Jordan are excluded). Only five economies have a quasi-fiscal deficit below 3 percent of gross domestic product (Algeria, Morocco, Tunisia, Qatar, and the West Bank), and hence would not be able to finance the average investment requirement through elimination of inefficiencies. For most economies, the main driver of the quasi-fiscal deficit is the underpricing of electricity, which costs on average 3.2 percent of gross domestic product (but 2.2 percent without Lebanon, Djibouti, Bahrain, and Jordan). Commercial inefficiency comes next, at an average cost of 0.6 percent of gross domestic product. Technical and labor inefficiencies represent, respectively, 0.4 and 0.2 percent of gross domestic product.

Suggested Citation

  • Daniel Camos-Daurella & Antonio Estache & Mohamad M. Hamid, 2017. "Quasi-fiscal Deficits in the Electricity Sector of the Middle East and North Africa: Sources and Size," Working Papers ECARES ECARES 2017-47, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:eca:wpaper:2013/262380
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    References listed on IDEAS

    as
    1. Trimble,Christopher Philip & Kojima,Masami & Perez Arroyo,Ines & Mohammadzadeh,Farah, 2016. "Financial viability of electricity sectors in Sub-Saharan Africa : quasi-fiscal deficits and hidden costs," Policy Research Working Paper Series 7788, The World Bank.
    2. Ianchovichina, Elena & Estache, Antonio & Foucart, Renaud & Garsous, Grégoire & Yepes, Tito, 2013. "Job Creation through Infrastructure Investment in the Middle East and North Africa," World Development, Elsevier, vol. 45(C), pages 209-222.
    3. Prasad Tallapragada V.S.N. & Maria Shkaratan & Ada Karina Izaguirre & Jaakko Helleranta & Saifur Rahman & Sten Bergman, 2009. "Monitoring Performance of Electric Utilities : Indicators and Benchmarking in Sub-Saharan Africa," World Bank Other Operational Studies 13030, The World Bank.
    4. World Bank, 2009. "Energy Efficiency Study in Lebanon," World Bank Other Operational Studies 12740, The World Bank.
    5. repec:wbk:wbpubs:28684 is not listed on IDEAS
    6. Daniel Camos & Robert Bacon & Antonio Estache & Mohamad M. Hamid, 2018. "Shedding Light on Electricity Utilities in the Middle East and North Africa," World Bank Publications, The World Bank, number 28684.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Quasi-fiscal deficit; electricity; utilities; Middle East and North Africa;

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H69 - Public Economics - - National Budget, Deficit, and Debt - - - Other
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy

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