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Regressive Energy Subsidies

The negative distributional consequences of subsidies are better understood and documented: it is widely known for example that most energy subsidies are regressive in that they benefit larger and richer consumers disproportionately. The imf has shown that the bottom 40 per cent of the population receive only between 3 and 20 per cent of diesel and gasoline subsidies in eight different Arab countries. The regressive effects of lpg and electricity subsidies are somewhat less dramatic, but in no single case do the poor receive their proportional share. The picture for food subsidies is somewhat better; but even for these, many individual policies disproportionately benefit richer strata (Sdra- levich et al., 2014).

The staggering opportunity costs of energy subsidies are illustrated by comparing them to government capital spending and education and health budgets. In many Arab countries, subsidies are larger than total capital spending, and in all 11 mena oil exporters analysed by the imf, subsidies in 2011 were larger than education and health budgets respectively, and sometimes larger than both budgets combined. Among oil importers, Jordan and Lebanon maintained energy subsidies that were larger than capital spending, education, and health, respectively; in Lebanon they were larger than the education and health budgets combined, while in Egypt they were larger than all three budget items combined (Sdralevich et al., 2014, 18).

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