A Benchmark of Implementing Energy Subsidy Reforms: Case Studies on Brazil, Chile, Indonesia, Turkey and Morocco

Since 2014, more than 32 countries which include 17 oil-producing countries proceeded to reform their subsidy systems especially in relation to energy subsidies. These reforms took different forms, as some opted to readjust/review prices, some reformed their fiscal framework, while others chose the complete liberalization of petroleum products prices. This global tendency was triggered by the lack of effectiveness of most of these subsidy systems, in a context of severe price volatility on international markets. As huge budgets were allocated to compensate staple products, in order to, protect low income social classes purchasing power, the achievement of the targeted objectives was costing very costly. As a result, most countries took the initiative to change their subsidy policy and look for more effective ways to channel financial support to the said social classes. Most of the countries who engaged in these reforms replaced subsidies by direct financial aids distributed based on social criteria to vulnerable social classes (Bolsa familia (Brazil), Chile solidario (Chile) etc) or by transferring funds to vital social sectors like health and education (Mexico, Columbia etc). Using different approaches (geographic targeting, incomeetc) these countries succeeded to identify the most worthy of these financial aid transfers. Many accompanying measures were adopted by each country following the specificities related to their different economic and social contexts. In the case of Morocco, there were no remarkable social measures accompanying the removal of LPPs subsidies removal, despite governmental reports stating social programs like Tayssir (primary education program), or the program for direct assistance to widowed women in precarious situations with orphaned children (granting 350 MAD per child monthly with a ceiling of 1050 MAD for a single household) as measures that were taken to improve social conditions for deprived social classes. It is hard to imagine how these measures could be effective if a sudden price jump occurs on international markets and local prices start soaring. Nevertheless, well briefly detail both programs alongside other benchmarks for accompanying measures that were taken in countries like Brazil, Chili, Mexico and Indonesia.