Inclusion and Resilience

versal subsidies suffer from significant deficiencies in targeting accuracy, as shown
in figure 22, panel A. Inefficiencies due to leakages of subsidies are staggering: more
than 70 percent of spending on food subsidies in Egypt and Iraq could be saved if
such leakages were eliminated.
Still, due to their sheer magnitude as well as the high vulnerability in the Middle
East and North Africa, subsidies have a significant impact on poverty, and any
reform needs to take this fact into account. Despite their inefficiency, simple removal
of subsidies would have significant impoverishing effects in many Middle
Eastern and North African countries. Given their wider coverage and generosity (in
terms of subsidization rates of essential goods in the consumption baskets), subsidies
have major impacts on keeping people out of poverty (see figure 22, panel B). In
Figure 22 Inefficient but Poverty-Reducing Subsidies in the Middle East and North
Africa, Selected Countries, c. 2004–10
A. Benefit Incidence of Subsidies
Total subsidy benefits, %
70
60
50
40
30
20
10
0
Poorest quintile Q2 Q3 Q4 Richest quintile
Iraq 2007: food ration cards Yemen, Rep., 2005: fuel subsidies
Egypt, Arab Rep., 2009: fuel subsidies Jordan 2010: fuel subsidies
Jordan, 2010: food subsidies
Source: Authors’ calculations based on national household surveys.
B. Poverty Impact of Subsidies
Impact of subsidies on
reducing poverty rate, %
40
30
20
10
0
Food subsidies Ration cards Fuel subsidies Food, gas,
water subsidies
Egypt, Arab Rep.
2009
Iraq
2007
Egypt, Arab Rep.
2004
Jordan
2010
Petroleum
subsidies
Yemen, Rep.
2005
Sources: World Bank 2010a, 2010b, 2005; Government of Jordan 2011a; Government of Yemen, World Bank, and UNDP 2007.
The Current State of SSNs in the Middle East and North Africa 27