Fuel subsidy removal and compensatory policy options in Ethiopia and Rwanda

David Rodríguez, Adnan Abdulaziz Shahir, Johana Silva and Anna Zasova

No wp-2026-74, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: This paper estimates the welfare effects of removing fuel subsidies in Ethiopia and Rwanda and assesses compensatory options for protecting low-income households. We combine tax-benefit microsimulation models with input-output analysis to capture direct fuel price effects and indirect effects through higher prices of other goods and services. Removing fuel subsidies increases household consumption expenditure by 3.3% in Ethiopia and 0.5% in Rwanda.

Keywords: Fuel subsidies; Poverty; Microsimulation; Sub-Saharan Africa; Taxation (search for similar items in EconPapers)
Date: 2026
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