The Socioeconomic Impacts of Energy Reform in Tunisia: A Simulation Approach

28 Pages Posted: 20 Apr 2016

See all articles by Jose Cuesta

Jose Cuesta

World Bank

AbdelRahmen El Lahga

Institut Supérieur de Gestion (Tunisia)

Gabriel Lara Ibarra

The World Bank - Poverty and Equity Global Practice

Date Written: June 17, 2015

Abstract

Tunisian social development policy making has always counted on energy subsidies to play a pivotal role. Due to the increasingly unsustainable budget implications, a new strategy has begun to reform the subsidy system in the energy sector while striking a balance between improving fiscal and equity considerations without increasing social tensions. This paper presents an analysis of the fiscal and distributive consequences of the changes to the subsidy setup announced by the government at the end of 2014. The results show that raising electricity prices for consumers and removing subsidies for other energy sources would lead to a short-term increase in the poverty rate of 2.5 percentage points. In addition, compensation mechanisms that could be readily implemented (such as universal coverage or building on the existing health cards system) will not bring substantive counterweight to the increased poverty, even if all savings of reforms could be perfectly channeled as cash transfers. The analysis suggests that bold reforms of energy subsidies need to be accompanied by equally bold improvements to the targeting schemes of public spending if poverty and disparities are to be substantively reduced.

Keywords: Poverty Diagnostics, Poverty Lines, Access of Poor to Social Services, Poverty Monitoring & Analysis, Energy Policies & Economics, Poverty Impact Evaluation, Poverty Assessment, Disability, Services & Transfers to Poor, Small Area Estimation Poverty Mapping, Economic Assistance

Suggested Citation

Cuesta, Jose and El Lahga, AbdelRahmen and Lara Ibarra, Gabriel, The Socioeconomic Impacts of Energy Reform in Tunisia: A Simulation Approach (June 17, 2015). World Bank Policy Research Working Paper No. 7312. Available at SSRN: https://ssrn.com/abstract=2620020

Jose Cuesta

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

AbdelRahmen El Lahga (Contact Author)

Institut Supérieur de Gestion (Tunisia) ( email )

45 Rue de la Liberte, Cite Bouchoucha
Bardo, Tunis 2000
Tunisia

Gabriel Lara Ibarra

The World Bank - Poverty and Equity Global Practice ( email )

1818 H St NW
Washington, DC 20433
United States

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