Publication: Quasi-Fiscal Deficits in the Electricity Sector of the Middle East and North Africa: Sources and Size
Loading...
Date
2017-12
ISSN
Published
2017-12
Author(s)
Editor(s)
Abstract
The annual electricity investments needed in the Middle East and North Africa region to keep up with demand have been estimated at about 3 percent of the region's projected gross domestic product. However, in most economies of the region, the ability to make those investments is limited by fiscal and macroeconomic constraints. This paper demonstrates that the solution is readily available: by improving the management and performance of the region's utilities, more than enough resources could be freed up to make the investments needed. The paper presents the first evaluation of the size and composition of the quasi-fiscal deficit associated with the management of the electricity sector in 14 economies in the Middle East and North Africa region. The estimations are for 2013. They show that the average quasi-fiscal deficit is 4.4 percent of gross domestic product (but goes down to 2.9 percent if Lebanon, Djibouti, Bahrain, and Jordan are excluded). Only five economies have a quasi-fiscal deficit below 3 percent of gross domestic product (Algeria, Morocco, Tunisia, Qatar, and the West Bank), and hence would not be able to finance the average investment requirement through elimination of inefficiencies. For most economies, the main driver of the quasi-fiscal deficit is the underpricing of electricity, which costs on average 3.2 percent of gross domestic product (but 2.2 percent without Lebanon, Djibouti, Bahrain, and Jordan). Commercial inefficiency comes next, at an average cost of 0.6 percent of gross domestic product. Technical and labor inefficiencies represent, respectively, 0.4 and 0.2 percent of gross domestic product.
Link to Data Set
Citation
“Estache, Antonio; Camos, Daniel; Hamid, Mohamad M.. 2017. Quasi-Fiscal Deficits in the Electricity Sector of the Middle East and North Africa: Sources and Size. Policy Research Working Paper;No. 8280. © World Bank. http://hdl.handle.net/10986/29072 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication Geopolitics and the World Trading System(Washington, DC: World Bank, 2024-12-23)Until the beginning of this century, the GATT/WTO system worked. Economic research provided a compelling explanation. It showed that if governments maximize the well-being of their own countries broadly defined, GATT/WTO principles would facilitate mutually beneficial cooperation over their trade policy choices. Now heightened geopolitical rivalry seems to have undermined the WTO. A simple transposition of the previous rationalization suggests that geopolitics and trade cooperation are not compatible. The paper shows that this is only true if rivalry eclipses any consideration of own-country well-being. In all other circumstances, there are gains from trade cooperation even with geopolitics. Furthermore, the WTO’s relevance is in question only if it adheres too rigidly to its existing rules and norms. Through measured adaptation to the geopolitical imperative, the WTO can continue to thrive as a forum for multilateral trade cooperation in the age of geopolitics.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Global Poverty Revisited Using 2021 PPPs and New Data on Consumption(Washington, DC: World Bank, 2025-06-05)Recent improvements in survey methodologies have increased measured consumption in many low- and lower-middle-income countries that now collect a more comprehensive measure of household consumption. Faced with such methodological changes, countries have frequently revised upward their national poverty lines to make them appropriate for the new measures of consumption. This in turn affects the World Bank’s global poverty lines when they are periodically revised. The international poverty line, which is based on the typical poverty line in low-income countries, increases by around 40 percent to $3.00 when the more recent national poverty lines as well as the 2021 purchasing power parities are incorporated. The net impact of the changes in international prices, the poverty line, and new survey data (including new data for India) is an increase in global extreme poverty by some 125 million people in 2022, and a significant shift of poverty away from South Asia and toward Sub-Saharan Africa. The changes at higher poverty lines, which are more relevant to middle-income countries, are mixed.Publication From Patriarchy to Policy(Washington, DC: World Bank, 2025-05-29)Legal institutions play an important role in shaping gender equality in economic domains, from inheritance to labor markets. But where do gender equal laws come from? Using cross-country data on social norms and legal equality, this paper investigates the socio-cultural roots of gender inequity in the legal system and its implications for female labor force participation. To identify the impact of social norms, the analysis uses an empirical strategy that exploits pre-modern differences in ancestral patriarchal culture as an instrument for present-day gender norms. The findings show that ancestral patriarchal culture is a strong predictor of contemporary norms, and conservative social norms are associated with more gender inequality in the de jure legal framework, the de facto implementation of laws, and the labor market. The paper presents evidence for a political selection mechanism linking norms to laws: countries with more conservative norms elect political leaders who are more hostile to gender equality, who then pass less progressive legislation. The results highlight the cultural roots and political drivers of legalized gender inequality.Publication Global Socio-economic Resilience to Natural Disasters(Washington, DC: World Bank, 2025-05-22)Most disaster risk assessments use damages to physical assets as their central metric, often neglecting distributional impacts and the coping and recovery capacity of affected people. To address this shortcoming, the concepts of well-being losses and socio-economic resilience—the ability to experience asset losses without a decline in well-being—have been proposed. This paper uses microsimulations to produce a global estimate of well-being losses from, and socio-economic resilience to, natural disasters, covering 132 countries. On average, each $1 in disaster-related asset losses results in well-being losses equivalent to a $2 uniform national drop in consumption, with significant variation within and across countries. The poorest income quintile within each country incurs only 9% of national asset losses but accounts for 33% of well-being losses. Compared to high-income countries, low-income countries experience 67% greater well-being losses per dollar of asset losses and require 56% more time to recover. Socio-economic resilience is uncorrelated with exposure or vulnerability to natural hazards. However, a 10 percent increase in GDP per capita is associated with a 0.9 percentage point gain in resilience, but this benefit arises indirectly—such as through higher rate of formal employment, better financial inclusion, and broader social protection coverage—rather than from higher income itself. This paper assess ten policy options and finds that socio-economic and financial interventions (such as insurance and social protection) can effectively complement asset-focused measures (e.g., construction standards) and that interventions targeting low-income populations usually have higher returns in terms of avoided well-being losses per dollar invested.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Shedding Light on Electricity Utilities in the Middle East and North Africa(Washington, DC: World Bank, 2018)The electricity sector in the Middle East and North Africa (MENA) suffers from a major paradox. Indeed, while the region continues to hold the world’s largest oil and gas reserves and has been able to maintain electricity access rates of close to 100 percent in most of its economies, it may not be in a position to cater to the future electricity needs of its fast-growing population and their business activities. The region’s primary energy demand is expected to continue to grow at an annual rate of 1.9 percent through 2035, requiring a significant increase in capacity. Investments have not been rising fast enough to meet those expectations. The main point of this report is to provide quantitative evidence of how improving utility management and more accurately targeting smaller subsidies would free up enough resources to make the needed investments and operate the sector at a lower cost. These management and policy changes would make electricity production and consumption more affordable for the region’s taxpayers and could even make it more affordable for the poorest. They would also ease the transition toward renewable energy sources, reducing the dependency on imports for some economies and, for the economies that export oil and gas, extending the asset life of their nonrenewable resources.Publication Shedding Light on Electricity Utilities in the Middle East and North Africa(World Bank, Washington, DC, 2018-01)The electricity sector in the Middle East and North Africa (MENA) is in the grip of an apparent paradox. Although the region is home to the world's largest oil and gas reserves and has been able to maintain electricity access rates of close to 100 percent in most of its economies, it may not be able to cater to the future electricity needs of its fast-growing population and their business activities. Primary energy demand is expected to rise at an annual rate of 1.9 percent through 2035, requiring a significant increase in generating capacity. Investments have not been rising fast enough to meet that requirement.Publication Job Creation through Infrastructure Investment in the Middle East and North Africa(World Bank, Washington, DC, 2012-08)In the next 10 years or so, the infrastructure sector has the potential to generate significant employment. This paper estimates annual job creation of about 2.0 million in direct jobs and 2.5 million in direct, indirect and induced infrastructure-related jobs just by meeting the infrastructure investment needs of about 6.9 percent of gross domestic product (about US$106 billion) for the Middle East and North Africa region on average. The breakdown in expected needs is 11 percent in developing oil exporters, 6 percent in oil importing countries, and 5 percent in the Gulf Cooperation Council oil exporters. Needs are particularly high in electricity and roads. While important, infrastructure job creation will not resolve the region's unemployment problem alone and its job creation potential varies greatly across countries. Moreover, the current ability to finance and hence meet the infrastructure needs varies significantly across countries. Oil importers are likely to fall short under business as usual scenarios. In a region in which the public sector is the main source of infrastructure financing, fiscal choices will thus matter to job creation through infrastructure. But there are more challenges, including the governance of job creation, and the proper targeting and costing of subsidies for job creation and the (re)training programs needed. Managing expectations will also matter, as infrastructure jobs will help but will not solve the region's unemployment and underemployment problems.Publication Infrastructure and Employment Creation in the Middle East and North Africa(Washington, DC: World Bank, 2013-01-17)The state of national labor markets has always been a concern for governments and development agencies such as the World Bank. Key labor market indicators, such as the rate of unemployment, send signals about the health of an economy and mirror citizens' attitudes. Being gainfully employed is an important aspect of an individual's well-being both financially and socially, as 'initial failures in finding a job can lead to persistent joblessness, a loss of interest in further schooling, delayed family formation, mental distress, and negative manifestations of citizenship' (World Bank 2007). Increased expenditure on infrastructure projects has a short-run effect on employment creation as more workers are hired to build infrastructure. These jobs last only during the investment phase of the project, and, without a continuous injection as in a stimulus-type program, such jobs will be temporary. However, the investment program will have created a larger stock of infrastructure capital and this permanent addition facilitates additional growth in the economy. The extra demand from this incremental growth creates more jobs, and these tend to be permanent. Furthermore, an employment experience in an infrastructure-related employment program, even if temporary, might improve the chance of being re-employed at a later date. This study capitalizes on the World Bank's long-standing knowledge on infrastructure, employment, and growth and applies it to the case of MENA to assess the employment creation potential of infrastructure investment.Publication Middle East and North Africa Regional Economic Update, April 2012(Washington, DC, 2012-04)Political uncertainties in the Middle East and North Africa (MENA) continue to affect the short term economic prospects in the region, while major developments in the global economy over the past six months have put the region on a two-track growth path for 2012. These developments include a significant rise in crude oil prices on fears of oil supply disruptions and weak economic activity in the Eurozone. Economic growth of MENA's oil exporting countries will be strong as it rebounds from the average of 3.4 percent in 2011 to 5.4 percent in 2012. Overall growth in the region is expected to be 4.8 percent in 2012, surpassing the 3 percent growth achieved in 2011. Improvement in the growth prospects of oil exporters is due to strength in oil markets. The fiscal situation is expected to remain tenuous for oil importing countries, especially those going through transitions. Overall, inflation is expected to remain subdued in 2012, with the notable exceptions of Iran and Egypt. Subsidies are currently dampening currently dampening the effects of increased global food and energy prices in many MENA countries.
Users also downloaded
Showing related downloaded files
Publication Business Ready 2024(Washington, DC: World Bank, 2024-10-03)Business Ready (B-READY) is a new World Bank Group corporate flagship report that evaluates the business and investment climate worldwide. It replaces and improves upon the Doing Business project. B-READY provides a comprehensive data set and description of the factors that strengthen the private sector, not only by advancing the interests of individual firms but also by elevating the interests of workers, consumers, potential new enterprises, and the natural environment. This 2024 report introduces a new analytical framework that benchmarks economies based on three pillars: Regulatory Framework, Public Services, and Operational Efficiency. The analysis centers on 10 topics essential for private sector development that correspond to various stages of the life cycle of a firm. The report also offers insights into three cross-cutting themes that are relevant for modern economies: digital adoption, environmental sustainability, and gender. B-READY draws on a robust data collection process that includes specially tailored expert questionnaires and firm-level surveys. The 2024 report, which covers 50 economies, serves as the first in a series that will expand in geographical coverage and refine its methodology over time, supporting reform advocacy, policy guidance, and further analysis and research.Publication Remarks at the United Nations Biodiversity Conference(World Bank, Washington, DC, 2021-10-12)World Bank Group President David Malpass discussed biodiversity and climate change being closely interlinked, with terrestrial and marine ecosystems serving as critically important carbon sinks. At the same time climate change acts as a direct driver of biodiversity and ecosystem services loss. The World Bank has financed biodiversity conservation around the world, including over 116 million hectares of Marine and Coastal Protected Areas, 10 million hectares of Terrestrial Protected Areas, and over 300 protected habitats, biological buffer zones and reserves. The COVID pandemic, biodiversity loss, climate change are all reminders of how connected we are. The recovery from this pandemic is an opportunity to put in place more effective policies, institutions, and resources to address biodiversity loss.Publication Media and Messages for Nutrition and Health(World Bank, Washington, DC, 2020-06)The Lao People’s Democratic Republic (Lao PDR) has experienced rapid and significant economic growth over the past decade. However, poor nutritional outcomes remain a concern. Rates of childhood undernutrition are particularly high in remote, rural, and upland areas. Media have the potential to play an important role in shaping health and nutrition–related behaviors and practices as well as in promoting sociocultural and economic development that might contribute to improved nutritional outcomes. This report presents the results of a media audit (MA) that was conducted to inform the development and production of mass media advocacy and communication strategies and materials with a focus on maternal and child health and nutrition that would reach the most people from the poorest communities in northern Lao PDR. Making more people aware of useful information, essential services and products and influencing them to use these effectively is the ultimate goal of mass media campaigns, and the MA measures the potential effectiveness of media efforts to reach this goal. The effectiveness of communication channels to deliver health and nutrition messages to target beneficiaries to ensure maximum reach and uptake can be viewed in terms of preferences, satisfaction, and trust. Overall, the four most accessed media channels for receiving information among communities in the study areas were village announcements, mobile phones, television, and out-of-home (OOH) media. Of the accessed media channels, the top three most preferred channels were village announcements (40 percent), television (26 percent), and mobile phones (19 percent). In terms of trust, village announcements were the most trusted source of information (64 percent), followed by mobile phones (14 percent) and television (11 percent). Hence of all the media channels, village announcements are the most preferred, have the most satisfied users, and are the most trusted source of information in study communities from four provinces in Lao PDR with some of the highest burden of childhood undernutrition.Publication Economic Recovery(World Bank, Washington, DC, 2021-04-06)World Bank Group President David Malpass spoke about the world facing major challenges, including COVID, climate change, rising poverty and inequality and growing fragility and violence in many countries. He highlighted vaccines, working closely with Gavi, WHO, and UNICEF, the World Bank has conducted over one hundred capacity assessments, many even more before vaccines were available. The World Bank Group worked to achieve a debt service suspension initiative and increased transparency in debt contracts at developing countries. The World Bank Group is finalizing a new climate change action plan, which includes a big step up in financing, building on their record climate financing over the past two years. He noted big challenges to bring all together to achieve GRID: green, resilient, and inclusive development. Janet Yellen, U.S. Secretary of the Treasury, mentioned focusing on vulnerable people during the pandemic. Kristalina Georgieva, Managing Director of the International Monetary Fund, focused on giving everyone a fair shot during a sustainable recovery. All three commented on the importance of tackling climate change.Publication Africa's Pulse, No. 31, Spring 2025: Improving Governance and Delivering for People in Africa(Washington, DC: World Bank, 2025-04-23)Amid global economic uncertainty and limited fiscal space in the region, Sub-Saharan Africa's economic activity is showing some resilience, with projected growth gradually increasing over 2025-2027 period. This growth is driven primarily by a rise in private demand, alongside a reduction in inflation rates and stable currencies. However, growth has been unable to reduce poverty and meet people's aspirations. The region is also grappling with persistent challenges, including political unrest and escalating demands for adequate economic opportunities, as reflected in a surge in protests over the past decade and a notable rise in coups since 2000. These dynamics highlight the urgent need for a renewed social contract between governments and citizens, emphasizing efficient public spending, better governance, and transparent market regulations to foster job creation and sustainable economic growth. African governments must prioritize governance reforms to maintain growth momentum and restore public trust. The report underscores the importance of strategic investments and complementary policies that bolster human capital, improve public services, and create a fair tax system, thereby fostering a business environment that supports growth and job creation.