IMF Notes

Reforming Energy Subsidies in the Arab Region

By Jeong Dae Lee, Jarin Tasnim Nashin, Bilal Tabti, Haytem Troug

October 9, 2025

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Jeong Dae Lee, Jarin Tasnim Nashin, Bilal Tabti, and Haytem Troug. "Reforming Energy Subsidies in the Arab Region", IMF Notes 2025, 003 (2025), accessed October 16, 2025, https://doi.org/10.5089/9798229027267.068

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Summary

Energy subsidies—on fuel, gas, and electricity—remain prevalent across the Arab world, with substantial fiscal, economic, and environmental cost. Arab countries where energy subsidies are more prevalent tend to see, on average, lower productivity growth. At the same time, experiences from Arab countries and elsewhere show that subsidy reforms can be successfully implemented. Over the last decade, several Arab countries have initiated energy subsidy reforms, often accompanied by new or strengthened social support mechanisms to shield the impact of higher energy prices on the most vulnerable. Such compensatory measures and the reallocation of fiscal gains towards social and development spending could enhance public support for reforms. At the same time, the timing and pace of phasing out subsidies are critical to minimize disruptions and ensure the reforms’ sustainability. Complementary actions include measures to improve governance and the business environment, supported by clear and proactive communication.

Subject: Commodities, Electricity, Energy prices, Energy pricing, Energy subsidies, Environment, Expenditure, Fuel prices, Greenhouse gas emissions, Inflation, Non-renewable resources, Price adjustments, Prices, Renewable energy

Keywords: Kingdom of, Acceptability of reforms, Arab region, Bahrain, Compensation programs, Electricity, Eligibility, Energy price reforms, Energy prices, Energy pricing, Energy subsidies, Energy subsidies, Fuel prices, Global, Greenhouse gas emissions, Inflation, Jordan, Non-renewable resources, Price adjustments, Public enterprises, Renewable energy, Sectoral analysis, Social transfers

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