Arab states may toe UAE line, remove fuel subsidies

Dubai - Kuwait and Saudi Arabia are already working on plans to link fuel prices to market movements.

UAE's decision to deregulate fuel price in the country has mounted pressure on other GCC and other Arab countries, and they may follow suit soon.

The deregulation of prices, thereby linking cost to market movements, was necessary following the slip in oil prices, which was impacting the exchequer.

However, revoking the subsidies might be a difficult choice for countries like Algeria, which uses the subsidy to purchase social peace.

Experts and international financial institutions consider liberalizing of fuel price a dire need to redress the imbalance in the economy and enhance the competitive capability as well as boosting the sustainable economic growth.

London-based Arabic daily Al Arab quoted informed sources that the Kuwaiti government was planning to accelerate steps to implement plans that had been repeatedly announced to continue reducing government subsidy after it had freed up diesel and kerosene prices at the beginning this year.

Kuwait had started selling kerosene at market rates from January this year, but the subsidy remained on other fuels. Bahrain and Oman had also stated they will reduce the subsidy on oil derivatives.

Saudi Arabia is also examining the feasibility of slashing subsidy on fuels but has not year taken broad measures in regard.

Kuwait's subsidy on energy and basic commodities reaches as much as $18.1 billion as per official information, and the government said it doesn't reach the beneficiaries from medium and low income groups.

"UAE is the only country in the Gulf region which goes further to that that level, which is also an exception in OPEC, though its economy is enjoying a better position due to its efficiency and capability in international competitiveness", said Pierre Terizian, director of Petro strategies Group.

UAE is making arrangements for an after-oil era by charting out ambitious objectives in the field of improving the renewable energies, diversifying the economy as well as other non-oil sectors.

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• Business