The Business Times

Gulf energy subsidies worth US$160b a year: World Bank

Published Tue, Nov 4, 2014 · 11:11 PM
Share this article.

[KUWAIT CITY] Arab states in the Gulf, which pump a fifth of the world's crude oil, spend more than US$160 billion on energy subsidies annually, a top World Bank official said Tuesday.

"Gulf states spend around 10 per cent of their gross domestic product every year on energy subsidies including fuel and electricity. That amounts to US$160 billion," said Shantayanan Devarajan, the bank's chief economist for Middle East and North Africa.

The six countries of the Gulf Cooperation Council - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates - had a combined GDP of US$1.64 trillion at the end of 2013, according to the International Monetary Fund.

Saudi Arabia, the world's top oil exporter, accounts for almost half of the GCC subsidies.

"The GCC and other MENA states must start cutting energy subsidies now otherwise problems associated with them will get worse," Mr Devarajan told a news conference in Kuwait on a World Bank report on subsidies.

The report said the Middle East and North Africa region, which is home to 5.5 per cent of the world's population and boasts 3.3 per cent of its GDP, accounts for 48 per cent of global energy subsidies.

The amount is estimated to exceed US$250 billion for the whole MENA region that also includes oil-exporting Iraq, Iran and Algeria which spend over 10 per cent of their GDP on energy subsidies.

"These subsidies are crowding out public spending on health, education and investment and possibly threatening sustainability of public debt," the report said, adding a large portion of these subsidies benefit the rich.

Egypt spends seven times more on fuel subsidies than on health, the World Bank document said.

"The MENA region suffers from low growth, high unemployment, traffic congestion and pollution... energy subsidies contribute to all of these problems. Reforming them should be the highest priority," said the report.


BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to

Energy & Commodities


Get the latest coverage and full access to all BT premium content.


Browse corporate subscription here