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The IMF says energy subsidy reform in the MENA region “has gained new momentum” as deficits widen amid “recent commodity price increases and greater social demands.” But the region has much further to go in cutting energy subsidies. The Fund, in a report issued last week, studies past examples of successful, and not so successful, subsidy reform to offer a ‘how to’ guide for implementing reform. Worryingly for Egypt, it cautions against ‘shock treatment’ tactics implemented by the region’s most recent reformer.
Egypt slashed energy subsidies last week, hiking the price for the most popular grades of gasoline by 40-88% and for diesel by 64% (MEES, 11 July). The budget for subsidies for the year which began on 1 July is E£100bn ($14bn), down by almost a quarter from the bill the previous year, with plans to phase out subsidies over five years (see p18). However the IMF’s latest report, ‘Subsidy Reform in the Middle East and North Africa: Recent Progress and Challenges Ahead,’ questions whether Egypt has properly laid the ground for such reform.
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