IMF urges MENA countries to tackle subsidies issue

The International Monetary Fund (IMF) said five countries of the MENA region have initiated reforms in energy and food subsidies. Others, mainly oil producing countries should tackle it as soon as possible. In a study on “The subsidy reform in the region of the Middle East and North Africa” (MENA), the International Monetary Fund considers that these energy and food subsidies are also “expensive” and ” ineffective “and” do not benefit the poor. ”

The Fund suggests that countries in the region that have yet to initiate these reforms should tackle it as soon as possible, and to prepare their publics for the costs which will be a burden “increasingly difficult to bear “in the future. These countries are mainly oil producers who should, according to the IMF, anticipate future difficulties on hydrocarbon revenues.

According to the IMF, energy subsidies have cost nearly $ 237 billion in 2011 in the region, equivalent to 48% of global grants and 8.6% of GDP of the MENA countries. The share of energy subsidies in oil-exporting countries in the MENA region amounted to $ 204 billion. Food subsidies have reached, the study says, to $ 22 billion in 2011, representing 0.7% of the GDP of countries in the region.

With expectations for reduction in oil production, some countries, such as Algeria, Bahrain, Sultanate of Oman, are in an “urgent need” to launch reforms in their systems of subsidies, adds the IMF. “In these countries, subsidy reform could fund more targeted spending and better protect the poor. Could also support production costs for future generations after oil reserves are exhausted,” reads the document.

Among the countries that have embarked on the issue of subsidy reform, the IMF study cited are: Egypt, Jordan, Mauritania, Morocco, Sudan, Tunisia and Yemen. These countries, the document adds, “have made the most progress in reforming subsidies. Reforms focused on increasing fuel prices and electricity tariffs, less on food subsidies, because of their relatively low cost budget and their high sensitivity to the social. ”

The IMF also notes that “oil-exporting countries have also made progress, even if they were more limited.” The countries listed in this chapter are: Iran, Saudi Arabia, Bahrain and Dubai. These two “began to raise prices of fuels and electricity”, while Kuwait “plans to eliminate subsidies on diesel.”

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