Reforming Energy Subsidies in the Arab Region

IMF Notes, October 9, 2025

Source details

Energy subsidies—on fuel, gas, and electricity—remain prevalent across the Arab world, with substantial fiscal, economic, and environmental cost.
Arab countries where energy subsidies are more prevalent tend to see, on average, lower productivity growth.
Over the last decade, several Arab countries have initiated energy subsidy reforms, often accompanied by new or strengthened social support mechanisms to shield the impact of higher energy prices on the most vulnerable.
Complementary actions identified include measures to improve governance and the business environment, supported by clear and proactive communication.
The timing and pace of phasing out subsidies are critical to minimize disruptions and ensure the reforms’ sustainability.

Energy subsidies are widespread across the Arab region and impose substantial fiscal, economic, and environmental costs.
There is an observed association where Arab countries with more prevalent energy subsidies tend to have, on average, lower productivity growth.
Experiences from Arab countries and elsewhere demonstrate that subsidy reforms can be successfully implemented.
Compensatory measures and the reallocation of fiscal gains towards social and development spending can enhance public support for reforms.

Implement new or strengthen existing social support mechanisms to shield the impact of higher energy prices on the most vulnerable.
Reallocate fiscal savings from subsidy reforms toward social and development spending to build public support.
Carefully choose the timing and pace of subsidy phasing-out to minimize economic and social disruptions and to ensure sustainability.
Pursue complementary reforms to improve governance and the business environment.
Adopt clear and proactive communication strategies to increase reform acceptability.

Reforming Energy Subsidies in the Arab Region, IMF Notes No 2025/003 (October 9, 2025).

Reforming Energy Subsidies in the Arab Region; IMF Note No. 2025/003; October 2025
- Reforming Energy Subsidies in the Arab Region; IMF Note No. 2025/003; October 2025 (Markdown version)
- Reforming Energy Subsidies in the Arab Region; IMF Note No. 2025/003; October 2025 (PDF)