Reforming Electricity Subsidies in Pakistan: Measures to Protect the Poor

Walker, Thomas ; Sahin, Sebnem ; Saqib, Mohammad ; Mayer, Kristy

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Abstract

As part of its energy sector reforms, the Government of Pakistan plans to reduce spending on electricity subsidies to 0.3-0.4 percent of gross domestic product (GDP) by mid-2016. The reforms will alleviate a major constraint on the government's budget. However, they will necessitate increases in the price of electricity, which have the potential to measurably reduce the welfare of the poor. The government will need to carefully design the price increases and provide associated compensation to avoid this outcome. This paper demonstrates that that it is possible for the government to protect the poor against most of the costs of the reform while at the same time improving the targeting of remaining subsidy expenditures. Measures that can be taken include targeting subsidies based on poverty scores and providing targeted cash compensation to poor households. The authors illustrate how these measures can be implemented, and estimate their associated welfare impacts.

Document type: Working paper
Publisher: The World Bank
Place of Publication: Washington, D.C.
Date: 2014
Version: Secondary publication
Date Deposited: 9 October 2015
Number of Pages: 19
Faculties / Institutes: Miscellaneous > Individual person
DDC-classification: Political science
Controlled Subjects: Pakistan, Elektrizitätsmarkt, Subvention, Armut
Uncontrolled Keywords: Pakistan, Strommarkt, Subvention, Armut / Pakistan, Electricity Market, Subsidiy, Poverty
Subject (classification): Politics
Economics
Countries/Regions: Pakistan
Additional Information: © World Bank. https://openknowledge.worldbank.org/handle/10986/21569 License: CC BY 3.0 IGO
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