IDEAS home Printed from https://ideas.repec.org/p/zbw/diedps/122021.html
   My bibliography  Save this paper

Subsidy reforms in the Middle East and North Africa: Strategic options and their consequences for the social contract

Author

Listed:
  • Auktor, Georgeta Vidican
  • Loewe, Markus

Abstract

After independence, energy and food subsidies became a cornerstone of the social contracts in the Middle East and North Africa (MENA) countries. Governments spent heavily to reduce poverty and strengthen their own legitimacy. However, as government rents faded, subsidy spending became financially unsustainable and foreign donors pressed for reforms. Yet, reform has been challenging for all the governments as subsidies affect all consumers, therefore raising the risk of government delegitimisation. Several publications have analysed the subsidy reforms of various MENA countries, but few have systematically analysed their impacts on the prevailing social contracts. This paper shows that reforms in a key policy field such as subsidy spending can affect the nature of social contracts profoundly and distinctly, depending on the reform strategy. It assesses the reform processes that took place in Morocco, Egypt and Iran primarily between 2010 and 2017, thus before the United States once more tightened sanctions against Iran and before the COVID-19 pandemic broke out. We argue that governments applied distinct strategies to reduce subsidy spending without provoking major social unrest to reforms, with the effect that the social contracts of the three countries changed in quite different ways. Morocco's government removed most subsidies, especially those that predominantly benefitted the middle-class. [...]

Suggested Citation

  • Auktor, Georgeta Vidican & Loewe, Markus, 2021. "Subsidy reforms in the Middle East and North Africa: Strategic options and their consequences for the social contract," IDOS Discussion Papers 12/2021, German Institute of Development and Sustainability (IDOS).
  • Handle: RePEc:zbw:diedps:122021
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/232574/1/175269922X.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. Heydemann, Steven, 2020. "Rethinking social contracts in the MENA region: Economic governance, contingent citizenship, and state-society relations after the Arab uprisings," World Development, Elsevier, vol. 135(C).
    3. Rougier, Eric, 2016. "“Fire in Cairo”: Authoritarian–Redistributive Social Contracts, Structural Change, and the Arab Spring," World Development, Elsevier, vol. 78(C), pages 148-171.
    4. Ali Enami & Nora Lustig & Alireza Taqdiri, 2019. "Fiscal policy, inequality, and poverty in Iran: assessing the impact and effectiveness of taxes and transfers," Middle East Development Journal, Taylor & Francis Journals, vol. 11(1), pages 49-74, January.
    5. John M. Piotrowski & David Coady & Justin Tyson & Rolando Ossowski & Robert Gillingham & Shamsuddin Tareq, 2010. "Petroleum Product Subsidies; Costly, Inequitable, and On the Rise," IMF Staff Position Notes 2010/05, International Monetary Fund.
    6. Ms. Giorgia Albertin & Mr. Younes Zouhar & Miss Randa Sab & Mr. Carlo A Sdralevich, 2014. "Subsidy Reform in the Middle East and North Africa: Recent Progress and Challenges Ahead," IMF Departmental Papers / Policy Papers 2014/008, International Monetary Fund.
    7. Peinhardt, Katherine, 2021. "Resilience through placemaking: Public spaces in Rotterdam's climate adaptation approach," IDOS Discussion Papers 1/2021, German Institute of Development and Sustainability (IDOS).
    8. Srigiri, Srinivasa Reddy & Dombrowsky, Ines, 2021. "Governance of the water-energy-food nexus for an integrated implementation of the 2030 Agenda: Conceptual and methodological framework for analysis," IDOS Discussion Papers 2/2021, German Institute of Development and Sustainability (IDOS).
    9. Ghoneim, Ahmed Farouk, 2012. "The Political Economy of Food Price Policy in Egypt," WIDER Working Paper Series 096, World Institute for Development Economic Research (UNU-WIDER).
    10. Ahmed Farouk Ghoneim, 2012. "The Political Economy of Food Price Policy in Egypt," WIDER Working Paper Series wp-2012-096, World Institute for Development Economic Research (UNU-WIDER).
    11. Paolo Verme & Khalid El-Massnaoui, 2017. "An Evaluation of the 2014 Subsidy Reforms in Morocco and a Simulation of Further Reforms," Natural Resource Management and Policy, in: Paolo Verme & Abdlekrim Araar (ed.), The Quest for Subsidy Reforms in the Middle East and North Africa Region, chapter 0, pages 63-90, Springer.
    12. Rentschler, Jun & Kornejew, Martin & Bazilian, Morgan, 2017. "Fossil fuel subsidy reforms and their impacts on firms," Energy Policy, Elsevier, vol. 108(C), pages 617-623.
    13. Rougier, Eric, 2016. "“Fire in Cairo”: Authoritarian–Redistributive Social Contracts, Structural Change, and the Arab Spring," World Development, Elsevier, vol. 78(C), pages 148-171.
    14. International Monetary Fund, 2010. "Islamic Republic of Iran: Selected Issues Paper," IMF Staff Country Reports 2010/076, International Monetary Fund.
    15. Mr. Mohammad Reza Farzin & Mr. Dominique M. Guillaume & Mr. Roman Zytek, 2011. "Iran: The Chronicles of the Subsidy Reform," IMF Working Papers 2011/167, International Monetary Fund.
    16. Hinnebusch, Raymond, 2020. "The rise and decline of the populist social contract in the Arab world," World Development, Elsevier, vol. 129(C).
    17. Karshenas, Massoud & Moghadam, Valentine M. & Alami, Randa, 2014. "Social Policy after the Arab Spring: States and Social Rights in the MENA Region," World Development, Elsevier, vol. 64(C), pages 726-739.
    18. Schlumberger, Oliver, 2021. "Puzzles of political change in the Middle East: Political liberalisation, authoritarian resilience and the question of systemic change," IDOS Discussion Papers 5/2021, German Institute of Development and Sustainability (IDOS).
    19. Melani Cammett & Nisreen Salti, 2016. "Popular Grievances and Perceptions of Socioeconomic Conditions in the Arab Region Prior to the Uprisings," Working Papers 1006, Economic Research Forum, revised May 2016.
    20. Cecile Couharde & Sara Mouhoud, 2020. "Fossil Fuel Subsidies, Income Inequality, And Poverty: Evidence From Developing Countries," Journal of Economic Surveys, Wiley Blackwell, vol. 34(5), pages 981-1006, December.
    21. Jörn Grävingholt & Sebastian Ziaja & Merle Kreibaum, 2015. "Disaggregating state fragility: a method to establish a multidimensional empirical typology," Third World Quarterly, Taylor & Francis Journals, vol. 36(7), pages 1281-1298, July.
    22. Eberhard Kienle, 2015. "Changed Regimes, Changed Priorities? Economic and Social Policies after the 2011 Elections in Tunisia and Egypt," Working Papers 928, Economic Research Forum, revised Jul 2015.
    23. Gharibnavaz, Mohammad Reza & Waschik, Robert, 2015. "Food and energy subsidy reforms in Iran: A general equilibrium analysis," Journal of Policy Modeling, Elsevier, vol. 37(5), pages 726-741.
    24. Paolo Verme & Abdelkrim Araar, 2017. "The Quest for Subsidies Reforms in the Middle East and North Africa Region," World Bank Publications - Books, The World Bank Group, number 25783.
    25. Ali Enami , Nora Lustig and Alireza Taqdiri, 2016. "Fiscal Policy, Inequality and Poverty in Iran: Assessing the Impact and Effectiveness of Taxes and Transfers the Poor in the Developing World - Working Paper 442," Working Papers 442, Center for Global Development.
    26. Breisinger, Clemens & ElDidi, Hagar & El-Enbaby, Hoda & Gilligan, Daniel & Karachiwalla, Naureen & Kassim, Yumna & Kurdi, Sikandra & Jilani, Amir Hamza & Thai, Giang, 2018. "Egypt's Takaful and Karama cash transfer program: Evaluation of program impacts and recommendations," Policy briefs 978-089629-596-4, International Food Policy Research Institute (IFPRI).
    27. Breisinger, Clemens & ElDidi, Hagar & El-Enbaby, Hoda & Gilligan, Daniel & Karachiwalla, Naureen & Kassim, Yumna & Kurdi, Sikandra & Jilani, Amir Hamza & Thai, Giang, 2018. "Egypt's Takaful and Karama cash transfer program: Evaluation of program impacts and recommendations [in Arabic]," Policy briefs 978-089629-587-1, International Food Policy Research Institute (IFPRI).
    28. Kojima,Masami, 2016. "Fossil fuel subsidy and pricing policies : recent developing country experience," Policy Research Working Paper Series 7531, The World Bank.
    29. Sommer, Christoph, 2021. "The impact of patient capital on job quality, investments and firm performance: Cross-country evidence on long-term finance," IDOS Discussion Papers 6/2021, German Institute of Development and Sustainability (IDOS).
    30. Fiedler, Charlotte & Rohles, Christopher, 2021. "Social cohesion after armed conflict: A literature review," IDOS Discussion Papers 7/2021, German Institute of Development and Sustainability (IDOS).
    31. International Monetary Fund, 2014. "Islamic Republic of Iran: Selected Issues," IMF Staff Country Reports 2014/094, International Monetary Fund.
    32. Djavad Salehi-Isfahani & Bryce Wilson Stucki & Joshua Deutschmann, 2015. "The Reform of Energy Subsidies in Iran: The Role of Cash Transfers," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 51(6), pages 1144-1162, November.
    33. Mr. David Coady & Justin Tyson & John M. Piotrowski & Mr. Robert Gillingham & Mr. Rolando Ossowski & Mr. Shamsuddin Tareq, 2010. "Petroleum Product Subsidies: Costly, Inequitable, and On the Rise," IMF Staff Position Notes 2010/005, International Monetary Fund.
    34. Schoderer, Mirja & Dombrowsky, Ines, 2021. "Уулзалт, Хураамж Ба Мэдээллийн Урсгал: Монгол Улсад Уул Уурхайн Болон Усны Бодлогыг Зохицуулах Нь [Forums, fees and data flows: Coordinating mining and water policy in Mongolia]," Briefing Papers 10/2021, German Institute of Development and Sustainability (IDOS).
    35. Gabriela Inchauste & David G. Victor, 2017. "The Political Economy of Energy Subsidy Reform," World Bank Publications - Books, The World Bank Group, number 26216.
    36. Burchi, Francesco & Roscioli, Federico, 2021. "Can integrated social protection programmes affect social cohesion? Mixed-methods evidence from Malawi," IDOS Discussion Papers 3/2021, German Institute of Development and Sustainability (IDOS).
    37. Yanguas, Pablo, 2021. "What have we learned about learning? Unpacking the relationship between knowledge and organisational change in development agencies," IDOS Discussion Papers 9/2021, German Institute of Development and Sustainability (IDOS).
    38. Skovgaard,Jakob & van Asselt,Harro (ed.), 2018. "The Politics of Fossil Fuel Subsidies and their Reform," Cambridge Books, Cambridge University Press, number 9781108416795, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Markus Loewe & Tina Zintl, 2021. "State Fragility, Social Contracts and the Role of Social Protection: Perspectives from the Middle East and North Africa (MENA) Region," Social Sciences, MDPI, vol. 10(12), pages 1-23, November.
    2. Francesco Burchi & Markus Loewe & Daniele Malerba & Julia Leininger, 2022. "Disentangling the Relationship Between Social Protection and Social Cohesion: Introduction to the Special Issue," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(3), pages 1195-1215, June.
    3. Loewe, Markus & Zintl, Tina & Houdret, Annabelle, 2021. "The social contract as a tool of analysis: Introduction to the special issue on “Framing the evolution of new social contracts in Middle Eastern and North African countries”," World Development, Elsevier, vol. 145(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Georgeta Vidican Auktor & Markus Loewe, 2022. "Subsidy Reform and the Transformation of Social Contracts: The Cases of Egypt, Iran and Morocco," Social Sciences, MDPI, vol. 11(2), pages 1-22, February.
    2. Cecile Couharde & Sara Mouhoud, 2020. "Fossil Fuel Subsidies, Income Inequality, And Poverty: Evidence From Developing Countries," Journal of Economic Surveys, Wiley Blackwell, vol. 34(5), pages 981-1006, December.
    3. Domínguez, J. Carlos, 2021. "Identity and discourse within diverse international networks: The Managing Global Governance network seen through the lens of thematic oral history," IDOS Discussion Papers 14/2021, German Institute of Development and Sustainability (IDOS).
    4. Yanguas, Pablo, 2021. "What have we learned about learning? Unpacking the relationship between knowledge and organisational change in development agencies," IDOS Discussion Papers 9/2021, German Institute of Development and Sustainability (IDOS).
    5. McCulloch, Neil & Natalini, Davide & Hossain, Naomi & Justino, Patricia, 2022. "An exploration of the association between fuel subsidies and fuel riots," World Development, Elsevier, vol. 157(C).
    6. Bante, Jana & Helmig, Felix & Prasad, Lara & Scheu, Lea Deborah & Seipel, Jean Christoph & Senkpiel, Helge & Geray, Markus & von Schiller, Armin & Sebudubudu, David & Ziaja, Sebastian, 2021. "E-government and democracy in Botswana: Observational and experimental evidence on the effects of e-government usage on political attitudes," IDOS Discussion Papers 16/2021, German Institute of Development and Sustainability (IDOS).
    7. Mr. Kangni R Kpodar & Kodjovi M. Eklou & Ms. Stefania Fabrizio, 2019. "Export Competitiveness - Fuel Price Nexus in Developing Countries: Real or False Concern?," IMF Working Papers 2019/025, International Monetary Fund.
    8. Griffiths, Steven, 2017. "A review and assessment of energy policy in the Middle East and North Africa region," Energy Policy, Elsevier, vol. 102(C), pages 249-269.
    9. Morakinyo O. Adetutu & Thomas G. Weyman-Jones, 2019. "Fuel Subsidies Versus Market Power: Is There a Countervailing Second-Best Optimum?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(4), pages 1619-1646, December.
    10. 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.
    11. Kheiravar, Khaled H, 2019. "Economic and Econometric Analyses of the World Petroleum Industry, Energy Subsidies, and Air Pollution," Institute of Transportation Studies, Working Paper Series qt3gj151w9, Institute of Transportation Studies, UC Davis.
    12. Tellioglu, Isin & Konandreas, Panos, 2017. "Agricultural Policies, Trade and Sustainable Development in Egypt," National Policies, Trade and Sustainable Development 320158, International Centre for Trade and Sustainable Development (ICTSD).
    13. Jun Rentschler & Morgan Bazilian, 2017. "Policy Monitor—Principles for Designing Effective Fossil Fuel Subsidy Reforms," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 11(1), pages 138-155.
    14. Ali Fakih & Pascal L. Ghazalian, 2019. "Analyzing the Perceptions of Egyptian Youth about the Arab Spring," CIRANO Working Papers 2019s-21, CIRANO.
    15. Boudekhdekh, Karim, 2022. "A comparative analysis of energy subsidy in the MENA region," MPRA Paper 115275, University Library of Munich, Germany.
    16. McCulloch, Neil & Moerenhout, Tom & Yang, Joonseok, 2021. "Fuel subsidy reform and the social contract in Nigeria: A micro-economic analysis," Energy Policy, Elsevier, vol. 156(C).
    17. Omotosho, Babatunde S., 2020. "Oil price shocks, fuel subsidies and macroeconomic (in)stability in Nigeria," MPRA Paper 105464, University Library of Munich, Germany.
    18. Schaffitzel, Filip & Jakob, Michael & Soria, Rafael & Vogt-Schilb, Adrien & Ward, Hauke, 2020. "Can government transfers make energy subsidy reform socially acceptable? A case study on Ecuador," Energy Policy, Elsevier, vol. 137(C).
    19. Loewe, Markus & Zintl, Tina & Houdret, Annabelle, 2021. "The social contract as a tool of analysis: Introduction to the special issue on “Framing the evolution of new social contracts in Middle Eastern and North African countries”," World Development, Elsevier, vol. 145(C).
    20. Ali Enami & Nora Lustig, 2018. "Inflation and the Erosion of the Poverty Reduction Impact of Iran's Universal Cash Transfer," Commitment to Equity (CEQ) Working Paper Series 68, Tulane University, Department of Economics.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:diedps:122021. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/ditubde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/ditubde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.