Quasi-fiscal Deficits in the Electricity Sector of the Middle East and North Africa: Sources and Size

Daniel Camos, Antonio Estache and Mohamad M. Hamid

Working Papers ECARES from ULB -- Universite Libre de Bruxelles

Abstract: The annual electricity investments needed in the Middle East and North Africa region to keep up with demand have been estimated at about 3 percent of the region’s projected gross domestic product. However, in most economies of the region, the ability to make those investments is limited by fiscal and macroeconomic constraints. This paper demonstrates that the solution is readily available: by improving the management and performance of the region’s utilities, more than enough resources could be freed up to make the investments needed. The paper presents the first evaluation of the size and composition of the quasi-fiscal deficit associated with the management of the electricity sector in 14 economies in the Middle East and North Africa region. The estimations are for 2013. They show that the average quasi-fiscal deficit is 4.4 percent of gross domestic product (but goes down to 2.9 percent if Lebanon, Djibouti, Bahrain, and Jordan are excluded). Only five economies have a quasi-fiscal deficit below 3 percent of gross domestic product (Algeria, Morocco, Tunisia, Qatar, and the West Bank), and hence would not be able to finance the average investment requirement through elimination of inefficiencies. For most economies, the main driver of the quasi-fiscal deficit is the underpricing of electricity, which costs on average 3.2 percent of gross domestic product (but 2.2 percent without Lebanon, Djibouti, Bahrain, and Jordan). Commercial inefficiency comes next, at an average cost of 0.6 percent of gross domestic product. Technical and labor inefficiencies represent, respectively, 0.4 and 0.2 percent of gross domestic product.

Keywords: Quasi-fiscal deficit; electricity; utilities; Middle East and North Africa (search for similar items in EconPapers)
JEL-codes: H54 H69 L32 L94 L98 (search for similar items in EconPapers)
Pages: 18 p.
Date: 2017-12
New Economics Papers: this item is included in nep-ara
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Working Paper: Quasi-fiscal deficits in the electricity sector of the Middle East and North Africa: sources and size (2017)
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