For many years, countries in sub-Saharan Africa have spent large amounts on subsidizing fuel and electricity. For both sources of energy combined, this averages around 3-4 percent of GDP. That’s about the same magnitude as public spending on health in many countries. Now we need to ask some important questions. Is this a good use of scarce resources? Where does this money go? Is it helping to support the livelihood of the poorest in African economies? Is it helping to boost the country’s competitiveness? The answers are largely, no. I believe this money can and must be used better to invest in the critical physical and social infrastructure required to sustain growth in sub-Saharan Africa. A recent IMF paper backs this up.
Let’s face it. Everybody loves cheap energy. Almost all human activities require energy consumption and, if something is so basic, it seems pretty obvious that it should not be denied to anyone and government should make it as cheap as possible to both households and companies, including through subsidies. This can help households avoid paying exorbitant energy bills at the end of the month, something that the poor may not be able to afford even for basic needs like heating and cooking.
Companies may also need energy subsidies to help them stay competitive. Energy subsidies appear even more appropriate, and even the obvious thing to do, in countries that have a large supply of energy, like oil producers. After all, this natural wealth in the form of energy belongs to the people; why shouldn’t it be cheap?
Filed under: Africa, Economic research, Español, Finance, Financial Crisis, Fiscal policy, Français, growth, Inequality, International Monetary Fund, Low-income countries, Middle East, Politics, عربي | Tagged: education, energy subsidies, energy taxes, environment, fiscal policy, GDP, infrastructure, reform | Leave a Comment »
By Masood Ahmed
Of all the regions in the world, the Middle East and North Africa region stands out as the one that relies the most on generalized energy subsidies. In energy-rich countries, governments provide subsidies to their populations as a way of sharing the natural resource wealth. In the region’s energy-importing countries, governments use subsidies to offer people some relief from high commodity prices, especially since social safety nets are often weak.
The question is: does this well-intended social protection policy represent the most efficient way to channel aid to the most vulnerable? The answer is no!
Filed under: Emerging Markets, Finance, Fiscal policy, growth, IMF, Investment, Middle East, Politics, عربي | Tagged: energy subsidies, environment, fiscal policy, governments, inequality, MENA, oil, oil prices, reform | Leave a Comment »
(Version in عربي)
I was in Algiers last week, my first time as the Managing Director of the IMF. It was a good visit: we reaffirmed the special partnership between Algeria and the IMF, and I was able to gain a deeper insight into Algeria’s aspirations—and also its challenges in reaching a hopeful future.
Filed under: Africa, International Monetary Fund | Tagged: Algeria, budget, business leaders, Christine Lagarde, civil society organizations, debt levels, economy, employment, energy, external deficits, gas, grwoth, IMF, iMFdirect, inclusive growth, inflation, International Monetary Fund, jobs, labor market policies, oil, private sector, productivity, subsidies, women, youth unemployment | Leave a Comment »
Today, I invite all of you to celebrate International Women’s Day. Let’s celebrate the incredible progress women have made over the past decades in different parts of society, playing a key role in economic life that our grandmothers worked for and dreamed about. Today, although men still dominate the executive suites in most professions, women all over the world hold high positions in the private sector and in public office. Women are no longer the Second Sex Simone de Beauvoir wrote about.
But far too many women face the most fundamental challenges: the right to safety and to choose the life they want.
Across the globe, fewer women than men are in paid employment, with only about 50 percent of working-age women participating in the labor force. In many countries, laws, regulations and social norms still constrain women’s possibilities to seek paid employment. And all over the world women conduct most of the work that remains unseen and unpaid, in the fields and in households.
Filed under: Africa, Asia, Europe, growth, International Monetary Fund, Latin America, Middle East, Politics | Tagged: advanced economies, child care, economic growth, eduation, emerging economies, employment, equal opportunity, fiscal policy, flexible work arrangements, gender wage gap, health services, IMF, iMFdirect, International Monetary Fund, International Women's Day, Japan, legislation, Netherlands, paid employment, Sweden, tax policy, unemployment, vocational training, women | Leave a Comment »
Even before the latest euro area GDP numbers and Italian elections cast a shadow over the continent, economists were struggling to reconcile the steady improvement in market sentiment with the more downbeat data on the economy, production, orders, and jobs.
This video looks at this puzzle from a somewhat different perspective than the usual—and still correct—narrative of weak banks and over-indebted public sectors caught in a vicious cycle. More specifically, we examine the role of household and corporate balance sheets in the countries under financial market stress and the implications for policy priorities.
Filed under: International Monetary Fund | Tagged: balance sheets, banking union, corporate debt, demand, Europe, European Central Bank, European Union, fiscal policy, growth, household debt, IMF, iMFdirect, International Monetary Fund, monetary policy | Leave a Comment »