IF YOU don’t own your citizens’ loyalty, perhaps you can rent it for a while. That seems to be the mantra of Arab regimes at the moment. Throughout the Middle East and north Africa, they are showering their citizens with money and gifts, like Hosni Mubarak’s policemen hosing down protesters with water cannon in Tahrir Square.
Governments in the region have long controlled prices of food and fuel. If you fix domestic prices and world prices rise, subsidies will increase even if the regime does nothing. Egypt keeps bread prices at a few cents a loaf. With wheat prices soaring, Mr Mubarak promised that bread would stay cheap, raising subsidies which now run at over $2 billion a year. The new government can hardly break his promise.
Fuel subsidies are bigger. In 2009 they amounted to roughly $150 billion in the Middle East and north Africa. Oil then cost just over $60 a barrel. It is now almost double that, so if prices were to stay at the same level regional fuel subsidies would rise to almost $300 billion this year. That is 7.5% of the area’s GDP, a vast amount. The only way to prevent such a jump would be to increase domestic fuel prices. But no countries have been brave enough to risk that except Qatar and Iran.
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