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Petroleum Subsidies in Yemen : Leveraging Reform for Development

ADVERSE IMPACT AGRICULTURAL ECONOMICS AGRICULTURAL GROWTH AGRICULTURAL PRODUCTION AGRICULTURAL SECTOR AGRICULTURE AVERAGE TRAVEL TIME BORROWING BUDGET CONSTRAINTS CAPITAL ACCUMULATION CAPITAL STOCK CASH TRANSFERS CLIMATE CHANGE COMMODITIES COMMODITY COMMODITY PRICE COMPETITIVENESS CONSUMER GOODS CONSUMERS CONSUMPTION EXPENDITURES CONTROLLED PRICES CORRELATION ANALYSIS COUNTRY TO COUNTRY CREDIT RATINGS CROP PRODUCTION CURRENT ACCOUNT CURRENT ACCOUNT BALANCE DEVELOPING COUNTRIES DEVELOPMENT POLICY DEVELOPMENT STRATEGY DIESEL DISTRIBUTIONAL EFFECTS DIVERSIFICATION DOMESTIC PRICE DOMESTIC PRICES DRIVERS ECONOMIC ACTIVITIES ECONOMIC DEVELOPMENT ECONOMIC DIVERSIFICATION ECONOMIC EFFICIENCY ECONOMIC GROWTH ECONOMIC IMPLICATIONS ECONOMIC OPPORTUNITIES ECONOMIC SECTORS ELASTICITIES ELASTICITY EMISSION EMISSION REDUCTIONS ENDOGENOUS VARIABLES ENERGY SUBSIDIES ENVIRONMENTAL IMPACTS EQUAL AMOUNTS EQUILIBRIUM EQUILIBRIUM THEORY EXCHANGE RATE EXOGENOUS VARIABLES EXPENDITURE EXPORTS EXTREME POVERTY FACTOR DEMAND FACTORS OF PRODUCTION FARM HOUSEHOLDS FINANCIAL RESOURCES FISCAL DEFICIT FISCAL RESOURCES FOOD INSECURITY FOOD POLICY FOOD PRICES FOOD SECURITY FOREIGN CURRENCY FOREIGN EXCHANGE FOSSIL FUEL FREIGHT FUEL FUEL CONSUMPTION FUEL COSTS FUEL PRICE FUEL PRICES FUEL SUBSIDIES FUELS GASOLINE GDP GDP PER CAPITA GLOBAL GROSS DOMESTIC PRODUCT GOVERNMENT BUDGET GOVERNMENT EXPENDITURES GROSS DOMESTIC PRODUCT GROWTH RATE GROWTH RATES HOUSEHOLD BUDGET HOUSEHOLD BUDGETS HOUSEHOLD CONSUMPTION HOUSEHOLD INCOME HOUSEHOLD INCOMES HOUSEHOLD WELFARE HOUSEHOLDS IMPACT ON POVERTY INCOME EFFECT INCOMES INFRASTRUCTURE INVESTMENT INFRASTRUCTURES INTEREST RATES INTERNATIONAL BANK INTERNATIONAL COOPERATION INVESTMENT DECISIONS INVESTMENT OPPORTUNITIES INVESTMENT OPTION IRRIGATION LABOR MARKET LABOR MARKETS LOW-INCOME COUNTRIES MACROECONOMICS MARGINAL PROPENSITY TO SAVE MARKET PRICES MIDDLE INCOME COUNTRY MULTIPLIER EFFECTS OUTPUT PER CAPITA INCOME PETROLEUM PRODUCTS POOR POOR HOUSEHOLDS POPULATION GROWTH POVERTY ASSESSMENT POVERTY IMPACT POVERTY LEVELS POVERTY LINE POVERTY RATES POVERTY REDUCTION POVERTY STATUS PRICE CONTROLS PRICE INCREASES PRICE OF FUEL PRICE SUBSIDIES PRIVATE INVESTMENT PRIVATE SECTOR GROWTH PRODUCTION COSTS PRODUCTION FUNCTION PRODUCTION STRUCTURE PRODUCTIVITY PRODUCTIVITY GROWTH PROFITABILITY PUBLIC FINANCES PUBLIC INVESTMENT PUBLIC INVESTMENTS PUBLIC POLICY PUBLIC SAVINGS PUBLIC SPENDING PUBLIC TRANSPORTATION REAL INCOME REMITTANCES ROAD ROAD INFRASTRUCTURE ROAD NETWORK ROADS RURAL RURAL AREAS RURAL COUNTERPARTS RURAL FARM RURAL HOUSEHOLDS SAVINGS INCREASES SOCIAL DEVELOPMENT SOCIAL IMPACTS SOCIAL INEQUALITY SOCIAL PROTECTION STRUCTURAL CHANGE SUBSIDIZATION SUSTAINABLE DEVELOPMENT SUSTAINABLE GROWTH SUSTAINABLE POVERTY REDUCTION TARGETING TAX TOTAL FACTOR PRODUCTIVITY TRANSACTION COSTS TRANSPORT TRANSPORT SECTOR VALUE ADDED VULNERABLE HOUSEHOLD WAGE RATES WORLD MARKET
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Middle East and North Africa | Middle East and North Africa | Middle East | Yemen, Republic of
2012-03-19T18:00:50Z | 2012-03-19T18:00:50Z | 2011-02-01

Petroleum subsidy reform is increasingly seen as an opportunity for consolidating public finances and fostering sustainable economic development. Yemen, as the country with the lowest per capita income in the group of countries with a high level of energy subsidies, started to reduce subsidies in 2010 and is discussing further options for reform. The results of this paper support a comprehensive petroleum subsidy reform in Yemen. Economic growth is projected to accelerate between 0.1 and 0.8 percentage points annually as a result of reform. Yet, the design of the reform is critically important, especially for the poor. Outcomes of alternative reform scenarios range from an increase in poverty of 2 to 6 percentage points. A promising strategy combines subsidy reduction with direct transfers of 13,800 to 19,700 Yemeni rials annually to the poorest 30 percent of households and enhanced public investments. Investments should focus on the utilities, transport, trade, and construction sectors to integrate economic spaces and create the platform for a restructuring of agricultural, industrial, and service value chains, which should encourage private sector led and job creating growth in the medium term.

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