Christine Lagarde, the international monetary fund’s Managing Director asserted on Saturday the importance of removing energy subsidies worldwide and especially in the Middle East.
The IMF chief said this while giving speech at the third annual Arab Fiscal Forum, organised by the Arab Monetary Fund and the IMF in Dubai.
She said that, “There is really no excuse for the continued use of energy subsidies.”
Energy subsidies are “extremely costly”; they are average 4.5 percent of GDP among oil exporters and 3 percent of GDP among oil importers, despite lower oil prices, she added.
Lagarde further noted that subsidies “lack transparency”; they are often “implicit and off budget”.
She continued saying that subsidies are “vastly inequitable, favouring the wealthy who consume a lot of energy.”
“They are subsidising environmental harm at a time when we need to go in the opposite direction, to protect the planet and peoples’ lives, health, and futures,” Lagarde clarified.
For cutting energy subsidies, oil importers have also made progress, she said.
“Egypt, for example, has committed to further energy reform in its programe supported by the IMF,” Lagarde added.
The Central Bank of Egypt (CBE) floated the pound in November 2016, followed by slashing energy subsidies, as part of a $12 billion, three-year loan deal with the IMF.
“The region is off to a promising start on energy subsidies, but there is still a long way to go—especially by depoliticizing fuel price setting and introducing automatic pricing mechanisms”, she concluded.