There are very few things on which economists overwhelmingly agree: free trade and apple pie are about it. But almost all of them will say that across-the-board subsidies for households and companies to lower the price of fuel are a terrible idea.
While advanced economies in general tax fossil fuels – or the carbon emissions that emanate from its use – emerging markets are still big users of subsidies and price caps. The IMF estimates that consumption of petroleum, electricity, natural gas and coal were subsidised by about 2 per cent of total government revenue in 2011 – and much more if compared to a hypothetical efficient tax system. Hydrocarbon exporters accounted for about two-thirds of the total. The subsidy of fossil fuels by oil producers and particularly within the Middle East and North Africa is extreme. Read more
Anything you can do, we can do better.
Malaysian policymakers might not be fans of the hit song from the musical Annie, but they’re acting as if they are, fast FT reports.
Days after Indonesia’s new president, Joko Widodo, lowered fuel subsidies – resulting in a 31 per cent rise in petrol and 36 per cent rise diesel prices – Malaysia has gone a step further. Read more
Indonesia’s new president Joko Widodo has kept his election promise to cut subsidies on fuel. He announced that prices will rise by some 30 per cent in order to tackle the government’s ballooning budget and current account deficits, fast FT reports.
Subsidised petrol will rise from Rp6,500 to Rp8,500 ($0.80) a litre while diesel will jump from Rp5,500 to Rp7,500 a litre. Read more
It took two years of vacillation before Indonesia’s cautious president, Susilo Bambang Yudhoyono, finally hiked government-administered fuel prices in June.
Now, just three months later, the prickly political issue of Indonesia’s ballooning fuel subsidy bill is back on the agenda after the slide in the value of the rupiah, the world’s worst-performing major currency since May, led to a spike in the price of petrol imports. Read more
Predicting when Indonesia’s gingerly President Susilo Bambang Yudhoyono will take a tough decision is a fool’s game.
Despite suggestions from his ministers and advisers on Monday that he would finally announce a long-discussed hike in the price of subsidised fuel, on Tuesday, SBY (as he is universally known) stepped back from the brink once again. Read more
Don't take my subsidy away
Struggling to bring down its fiscal deficit, India wants to stop allowing commercial ventures like movie theatres, swish office complexes, and hotels from using highly-subsidised diesel fuel to run-back up generators when the power goes out. It is also trying to wean factories, mobile phone towers, and state-run bus companies from highly subsidised fuel.
But New Delhi has discovered that a partial-phase out of subsidies – particularly targeting affluent and resourceful entrepreneurs – is more difficult than it looks. Read more
The Middle East and North African nations fall into two categories that make their economies vastly different: some are wealthy oil exporters, the rest are net importers. But they have one thing in common: subsidies, writes Ayesha Daya.
With oil prices expected to drop this year, amid sluggish global growth and unexpected supplies coming on stream in non-Opec countries, MENA’s richer nations may have to join the poorer ones in tightening their belts. Read more
A delegation from the International Monetary Fund is due in Egypt next week to discuss a much-needed $4.8bn loan seen as a lifeline to an economy battered by almost two years of political turbulence. Crucial to securing the loan will be reforms to be unveiled by the Egyptian government aimed at helping it rein in an 11 per cent budget deficit. Cuts to the country’s costly energy subsidies (which suck in 20 per cent of the budget) are expected to be at the heart of these reforms. Read more
Has the Egyptian government conducted a real social dialogue on its planned economic reforms? The government says it has just finished such a discussion over the programme it will submit later this month to the International Monetary Fund.
But some participants aren’t sure they were properly consulted. Read more