I agree very much with the last two comments (Jayati and Max). Compensating the poor for their losses AFTER fuel subsidies are removed can be tricky and counterproductive. The increase in social expenditures (i.e compensation to the poor) that are promised in exchange for reducing fuel subsidies should be a prerequisite (pursued beforehand) to removing subsidies.
FYI - the IMF’s Technical Assistance report on Mali is recommending an improved fuel pricing formula. Like subsidy removals, a new pricing formula will raise cost of fuel. This may be helpful for reducing the volatility of fuel prices in Mali, but the immediate impact is higher fuel costs. The IMF encouraged “uniformity” on fuel taxes in this report – meaning that other fuels, like kerosene, will also see price increases. Although the IMF does acknowledge that kerosene prices disproportionately impact the poor, it was unclear if they were recommended a lower tax on this product.
I think raising government revenues is critical, but should not be done at the expense of the poor.
Nathan Coplin
New Rules for Global Finance
FYI - the IMF’s Technical Assistance report on Mali is recommending an improved fuel pricing formula. Like subsidy removals, a new pricing formula will raise cost of fuel. This may be helpful for reducing the volatility of fuel prices in Mali, but the immediate impact is higher fuel costs. The IMF encouraged “uniformity” on fuel taxes in this report – meaning that other fuels, like kerosene, will also see price increases. Although the IMF does acknowledge that kerosene prices disproportionately impact the poor, it was unclear if they were recommended a lower tax on this product.
I think raising government revenues is critical, but should not be done at the expense of the poor.
Nathan Coplin
New Rules for Global Finance
