World Bank tells oil-exporting nations to eliminate energy subsidies

The World Bank has urged oil-exporting Mena countries to eliminate energy subsidies, review energy-pricing policies, and diversify further economies amidst low crude prices.
"For energy-exporting countries, eliminating costly energy subsidies could help offset the collapse in revenue from oil extraction given that oil prices are well below their fiscal breakeven points. Economic and financial weaknesses in energy exporters are especially likely to pose difficulties. For the energy exporters, this will require pressing ahead with the reform programmes that many launched after the price plunge of 2014-16," the World Bank said in its latest Global Economic Prospects report released on Tuesday.
Between mid-2014 and end-2016, more than half of energy-exporting countries reformed energy subsidies, including countries in the Middle East and North Africa region. A number of energy exporters have also reduced utility subsidies but during the Covid-19 pandemic, subsidies were raised again in some countries including Oman, Saudi Arabia and the UAE, it said in the report.
"For energy exporters, this most recent oil price decline is yet another reminder of the urgency to continue with reforms to diversify their economies. These include measures to strengthen competition, broaden fiscal revenue bases, and enhance fiscal and monetary policy frameworks," World Bank said.
Several countries have implemented tax reforms to compensate for the loss of government revenues and to insulate themselves from future oil price fluctuations. This has included the introduction of taxes of value-added taxes (VAT) in Bahrain, Malaysia, Saudi Arabia, the UAE as well as raising existing VAT or excise tax rates such as Bahrain, Colombia, Oman and Saudi Arabia.
waheedabbas@khaleejtimes.com