Central Data Catalog

Citation Information

Type Journal Article - Sustainability
Title Leveraging fuel subsidy reform for transition in Yemen
Author(s)
Volume 4
Issue 11
Publication (Day/Month/Year) 2012
Page numbers 2862-2887
URL http://www.mdpi.com/2071-1050/4/11/2862/htm
Abstract
Yemen is currently undergoing a major political transition, yet many economic challenges—including fuel subsidy reform—remain highly relevant. To inform the transition process with respect to a potential subsidy reform, we use a dynamic computable general equilibrium and microsimulation model for Yemen; we show that overall growth effects of subsidy reduction are positive in general, but poverty can increase or decrease depending on reform design. A promising strategy for a successful reform combines fuel subsidy reduction with direct income transfers to the poorest one-third of households during reform, and productivity-enhancing investment in infrastructure, plus fiscal consolidation. Public investments should be used for integrating economic spaces and restructuring of agricultural, industrial and service value chains in order to create a framework that encourages private-sector-led and job-creating growth.

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