Cairo – Mubasher: In July 2015, the UAE decided to link its fuel retail prices to global ones through an automatic pricing mechanism. A few months later, other GCC members increased their fuel prices to accommodate the repercussions of falling oil prices.
Qatar adopted an approach similar to the UAE's earlier this month, while the deputy crown prince of Saudi Arabia said in a recent interview that the Saudi government was working on different subsidy reform programmes.
"The Egyptian government, which is normally more reluctant to approach such a topic, reiterated its earlier target to trim electricity subsidies within the next five years," said a report by MubasherTrade Research (MTR).
Tackling energy subsidy reform, which includes fuel and electricity, was in line with MTR's "general theme of the region [which is] Reform is key in MENA as the region’s governments seek fixing their fiscal imbalances."
Energy subsidies in the Middle East remain the highest in the world, with around 46.3% of total pre-tax energy subsidies in 2015, the report highlighted, noting that examining the cost of energy subsidies, MTR tends to use the average international price of fuel instead of the extraction cost to calculate the price gap.
Saudi Arabia ranked first with total post-tax energy subsidies, representing 13.2% of GDP in 2015, down from 17.2% in 2013, while Egypt stood next (down to 9.9% from 16.6%), followed by the UAE with 6.5% down from 8.6%. Qatar's total post tax energy subsidies reached 6.4% compared to 7.9%.
At a product level, petroleum, which includes diesel, gasoline, kerosene, etc., took the lion’s share of subsidies in KSA, Egypt and Qatar, while natural gas came first in the UAE, MTR's report revealed.
"We note that the significant decline in oil prices between 2013-2015 in addition to the reforms undertaken by Egypt played an important role lowering the subsidies share of GDP," the report stated.
