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Food and energy prices, government subsidies and fiscal balances in south Mediterranean countries

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Listed:
  • Albers, Ronald
  • Peeters, Marga

Abstract

Just before the global crisis soaring commodity prices pushed up inflation significantly, not least in EU neighbour countries at the Mediterranean. These price shocks affected public finances in the southern Mediterranean region, notably via government subsidies. Partly due to lags in the transmission of commodity prices into prices for final users the subsidies burden continued to be felt, despite the price falls registered in the wake of the credit crisis. We show that downward price rigidities play a role. Recently, commodity price pressures have re-emerged. We focus on food prices and analyse recent developments in food inflation in Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, the occupied Palestinian territories, Syria and Tunisia in comparison with other middle income economies. Subsidies on food and fuel are quantified per country for the period 2002-2010. The incremental government subsidies entail an estimated deterioration of the government balances of up to more than 2% of GDP in 2008 and, for most countries only slight improvements in the global recession year 2009. Ensuing longer-term challenges for public finances remain as inflation rises on the back of higher global economic growth. As recent events in Tunisia and Egypt illustrate, these can have important political implications. Finally, the paper discusses some options that can lead to more efficient government spending, even in the event of sharp swings in prices of basic necessities.

Suggested Citation

  • Albers, Ronald & Peeters, Marga, 2011. "Food and energy prices, government subsidies and fiscal balances in south Mediterranean countries," MPRA Paper 28788, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:28788
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    References listed on IDEAS

    as
    1. Adams, Richard H., 2000. "Self-targeted subsidies - the distributional impact of the Egyptian food subsidy system," Policy Research Working Paper Series 2322, The World Bank.
    2. Mr. Alex Segura-Ubiergo & Miss Taline Koranchelian & Mr. Carlos Mulas-Granados, 2008. "Reforming Government Subsidies in the New Member States of the European Union," IMF Working Papers 2008/165, International Monetary Fund.
    3. Richard H. Adams, Jr., 2000. "Self-Targeted Subsidies: The Political and Distributional Impact of the Egyptian Food Subsidy System," Economic Development and Cultural Change, University of Chicago Press, vol. 49(1), pages 115-136.
    4. World Bank, 2009. "Global Economic Prospects 2009 : Commodities at the Crossroads," World Bank Publications - Books, The World Bank Group, number 2581.
    5. Peeters, Marga & Strahilov, Kiril, 2008. "Macro-economic policy reactions to soaring food prices in Mediterranean countries, Russia, the CIS and the GCC," MPRA Paper 23860, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Soliman, Ibrahim & Capitanio, Fabian & Cerciello, Luigi, 2013. "Risk Assessment Of Major Crops In Egyptian Agriculture," Politica Agricola Internazionale - International Agricultural Policy, Edizioni L'Informatore Agrario, vol. 2013(3), September.
    2. Ansgar Belke & Christian Dreger, 2015. "The transmission of oil and food prices to consumer prices," International Economics and Economic Policy, Springer, vol. 12(1), pages 143-161, March.
    3. Loening, Josef L., 2011. "Middle East and North Africa Countries' Vulnerability to Commodity Price Increases," MPRA Paper 33393, University Library of Munich, Germany.
    4. Carine Meyimdjui, 2017. "Food Price Shocks and Government Expenditure Composition: Evidence from African Countries," CERDI Working papers halshs-01457366, HAL.
    5. Marga Peeters & Ronald Albers, 2013. "Food Prices, Government Subsidies and Fiscal Balances in South Mediterranean Countries," Development Policy Review, Overseas Development Institute, vol. 31(3), pages 273-290, May.
    6. Benson, Todd & Minot, Nicholas & Pender, John & Robles, Miguel & von Braun, Joachim, 2013. "Information to guide policy responses to higher global food prices: The data and analyses required," Food Policy, Elsevier, vol. 38(C), pages 47-58.
    7. Sherine Al-Shawarby & Hoda Selim, 2013. "Are International Food Price Spikes the Source of Egypt’s High Inflation?," Financial and Monetary Policy Studies, in: Marga Peeters & Nidal Sabri & Wassim Shahin (ed.), Financial Integration, chapter 0, pages 61-83, Springer.
    8. repec:zbw:rwirep:0448 is not listed on IDEAS
    9. Carine Meyimdjui, 2017. "Food Price Shocks and Government Expenditure Composition: Evidence from African Countries," Working Papers halshs-01457366, HAL.
    10. Ansgar Belke & Christian Dreger, 2013. "The Transmission of Oil and Food Prices to Consumer Prices – Evidence for the MENA Countries," Ruhr Economic Papers 0448, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    11. Carine MEYIMDJUI, 2017. "Food Price Shocks and Government Expenditure Composition: Evidence from African Countries," Working Papers 201703, CERDI.
    12. Velez, Carlos E. & Al-Shawarby, Sherine & El-Laithy, Heba, 2012. "Equality of opportunity for children in Egypt, 2000-2009 : achievements and challenges," Policy Research Working Paper Series 6159, The World Bank.
    13. repec:pra:mprapa:37705 is not listed on IDEAS
    14. repec:diw:diwwpp:dp1332 is not listed on IDEAS
    15. Ansgar Belke & Christian Dreger, 2013. "The Transmission of Oil and Food Prices to Consumer Prices: Evidence for the MENA Countries," Discussion Papers of DIW Berlin 1332, DIW Berlin, German Institute for Economic Research.
    16. Muhammad Atta-ul-Islam Abrar & Muhsin Ali & Uzma Bashir & Karim Khan, 2019. "Energy Pricing Policies and Consumers’ Welfare: Evidence from Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 24(1), pages 1-28, Jan-June.

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    More about this item

    Keywords

    food prices; energy prices; inflation; public finances; government subsidies;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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