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Petroleum subsidies in Yemen: Leveraging reform for development


  • Breisinger, Clemens
  • Engelke, Wilfried
  • Ecker, Olivier


Petroleum subsidy reform is increasingly seen as an opportunity for consolidating public finances and fostering sustainable economic development. Yemen, as the country with the lowest per capita income in the group of countries with a high level of energy subsidies, started to reduce subsidies in 2010 and is discussing further options for reform. The results of this paper support a comprehensive petroleum subsidy reform in Yemen. Economic growth is projected to accelerate between 0.1 and 0.8 percentage points annually as a result of reform. Yet, the design of the reform is critically important, especially for the poor. Outcomes of alternative reform scenarios range from an increase in poverty of 2 to 6 percentage points. A promising strategy combines subsidy reduction with direct transfers of 13,800 to 19,700 Yemeni rials annually to the poorest 30 percent of households and enhanced public investments. Investments should focus on the utilities, transport, trade, and construction sectors to integrate economic spaces and create the platform for a restructuring of agricultural, industrial, and service value chains, which should encourage private sector led and job creating growth in the medium term.

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  • Breisinger, Clemens & Engelke, Wilfried & Ecker, Olivier, 2011. "Petroleum subsidies in Yemen: Leveraging reform for development," IFPRI discussion papers 1071, International Food Policy Research Institute (IFPRI).
  • Handle: RePEc:fpr:ifprid:1071

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    References listed on IDEAS

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    Cited by:

    1. World Bank, 2012. "Republic of Yemen - Joint Social and Economic Assessment," World Bank Other Operational Studies 12284, The World Bank.
    2. Ovadiya,Mirey & Kryeziu,Adea & Masood,Syeda & Zapatero Larrio,Eric, 2015. "Social protection in fragile and conflict-affected countries : trends and challenges," Social Protection and Labor Policy and Technical Notes 96378, The World Bank.
    3. Nathan S. Balke, Michael Plante, and Mine Yücel, 2015. "Fuel Subsidies, the Oil Market and the World Economy," The Energy Journal, International Association for Energy Economics, vol. 0(Adelman S).
    4. Breisinger, Clemens & Ecker, Olivier & Al-Riffai, Perrihan & Engelke, Wilfried & Al-Bataly, Abdulmajeed, 2012. "Managing transition in Yemen: An assessment of the costs of conflict and development scenarios for the future," IFPRI discussion papers 1210, International Food Policy Research Institute (IFPRI).
    5. Bordignon, Jacopo & Breisinger, Clemens, 2015. "Policy changes in times of crisis: Evidence from the Arab Spatial Policy Analyzer:," IFPRI discussion papers 1471, International Food Policy Research Institute (IFPRI).
    6. Mahmoud Al-Iriani, 2012. "Oil Curse in Yemen: The Role of Institutions and Policy," Working Papers 694, Economic Research Forum, revised 2012.
    7. Cheon, Andrew & Urpelainen, Johannes & Lackner, Maureen, 2013. "Why do governments subsidize gasoline consumption? An empirical analysis of global gasoline prices, 2002–2009," Energy Policy, Elsevier, vol. 56(C), pages 382-390.
    8. Coady, David & Parry, Ian & Sears, Louis & Shang, Baoping, 2017. "How Large Are Global Fossil Fuel Subsidies?," World Development, Elsevier, vol. 91(C), pages 11-27.
    9. Al Iriani, Mahmoud A. & Trabelsi, Mohamed, 2016. "The economic impact of phasing out energy consumption subsidies in GCC countries," Journal of Economics and Business, Elsevier, vol. 87(C), pages 35-49.
    10. David Coady & Ian W.H. Parry & Louis Sears & Baoping Shang, 2015. "How Large Are Global Energy Subsidies?," IMF Working Papers 15/105, International Monetary Fund.
    11. Bhattacharyya, Ranajoy & Ganguly, Amrita, 2017. "Cross subsidy removal in electricity pricing in India," Energy Policy, Elsevier, vol. 100(C), pages 181-190.

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    Development strategies; Growth; petroleum subsidy; Poverty; Reform;

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