Energy Subsidy Reform in Egypt

In the aftermath of the Arab Spring, Egypt faced both political and economic challenges, affected by a growing fiscal deficit, economic slowdown, increasing poverty, socioeconomic transition, and energy shortages. In 2013, Egypt’s power sector was recovering only about 30 percent of its operational and capital costs, while government expenditure on energy subsidies had reached an estimated 22 percent of the budget and 7 percent of GDP, exceeding combined expenditure on education, health, and infrastructure. Electricity supply was unreliable, with frequent outages that affected both consumer welfare and manufacturing output. At the same time, substantial liquid fuel subsidies incentivized excessive production and consumption of fossil fuels, and therefore GHG emissions, harming the environment and the climate and discouraging investment in energy efficiency and cleaner power generation alternatives. This case study provides an overview of the government’s efforts to reform energy subsidies between 2013 and 2017 and discusses main challenges, implementation approaches, and outcomes.