Petroleum Subsidies in Yemen : Leveraging Reform for Development
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...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110301090700 http://hdl.handle.net/10986/3351 |
| Summary: | 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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