Petroleum Subsidies in Yemen: Leveraging Reform for Development

29 Pages Posted: 20 Apr 2016

See all articles by Clemens Breisinger

Clemens Breisinger

International Food Policy Research Institute (IFPRI)

Wilfried Engelke

affiliation not provided to SSRN

Olivier Ecker

affiliation not provided to SSRN

Date Written: February 1, 2011

Abstract

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.

Keywords: Transport Economics Policy & Planning, Economic Theory & Research, Emerging Markets, Access to Finance, Rural Poverty Reduction

Suggested Citation

Breisinger, Clemens and Engelke, Wilfried and Ecker, Olivier, Petroleum Subsidies in Yemen: Leveraging Reform for Development (February 1, 2011). World Bank Policy Research Working Paper No. 5577. Available at SSRN: https://ssrn.com/abstract=1774424

Clemens Breisinger (Contact Author)

International Food Policy Research Institute (IFPRI) ( email )

2033 K Street, NW
Washington, DC 20006
United States

Wilfried Engelke

affiliation not provided to SSRN

No Address Available

Olivier Ecker

affiliation not provided to SSRN

No Address Available

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