Publication: Leveraging Fuel Subsidy Reform for Transition in Yemen
Date
2012-10-30
ISSN
Published
2012-10-30
Author(s)
Breisinger, Clemens
Engelke, Wilfried
Ecker, Olivier
Abstract
Yemen is currently undergoing a major political transition, yet many economic challenges—including fuel subsidy reform—remain highly relevant. To inform the transition process with respect to a potential subsidy reform, we use a dynamic computable general equilibrium and microsimulation model for Yemen; we show that overall growth effects of subsidy reduction are positive in general, but poverty can increase or decrease depending on reform design. A promising strategy for a successful reform combines fuel subsidy reduction with direct income transfers to the poorest one-third of households during reform, and productivity-enhancing investment in infrastructure, plus fiscal consolidation. Public investments should be used for integrating economic spaces and restructuring of agricultural, industrial and service value chains in order to create a framework that encourages private-sector-led and job-creating growth.
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Cited 12 times in Scopus (View citations)