Fuel subsidies to curb cost-push inflation: a case study of Pakistan to assess the impact of untargeted subsidies on fiscal space and current accounts

• Autorzy: Khalid Talha

Identyfikatory

DOI

10.33223/epj/156594

Warianty tytułu

PL

Dotacje do paliw w celu ograniczenia inflacji spowodowanej kosztami: studium przypadku Pakistanu badające wpływ nieukierunkowanych dotacji na przestrzeń fiskalną i rachunek bieżący

• Języki publikacji: EN

Abstrakty

EN

The rapid surge of global oil prices, on account of the pent-up demand after COVID-19 and the Russian-Ukraine war, has significantly contributed to the cost-push inflation as well as twin deficits, predominantly in developing economies. Motivated by the intention to curb the inflation, governments of several oil-dependent economies have rolled out fiscal measures to provide immediate relief to households through subsidizing the fuel component of the consumption basket. This paper provides a case study of Pakistan, wherein the effectiveness of untargeted gasoline and diesel subsidies has been gauged against alternative direct disbursement mechanisms. The analysis reveals that under the price-control based indirect subsidy disbursement mechanism, only 11% of the total domestic subsidies were directed to the poorest 40% of the households, whereas approximately 55% of the total subsidies were allocated to the 20% of the most liquid household segment. The case study analyzes the performance of alternative direct subsidy disbursement mechanisms which transpires into the potential fiscal savings of PKR 74.63 billion, while providing coverage to 40% of the lowest household segment. The study also evaluates the implication of the pass-through of the true prices on the national consumption of gasoline and diesel in the short-term, which reveals the sharp reduction of petroleum consumption in the total bill from 37% to 23%, thereby providing substantial relief to the current account balance. The finding provides key insights for economies to institutionalize the necessary social protection system and progressively transit to the direct subsidy disbursement mechanism while striving to contain the cost-push-based inflation triggered through the rapid movement of global oil prices.

PL

Gwałtowny wzrost światowych cen ropy naftowej, spowodowany stłumionym popytem po COVID-19 i wojnie rosyjsko-ukraińskiej, znacząco przyczynił się do wzrostu inflacji oraz podwójnych deficytów, głównie w gospodarkach rozwijających się. Kierując się zamiarem ograniczenia inflacji, rządy kilku gospodarek zależnych od ropy naftowej wprowadziły środki fiskalne w celu zapewnienia natychmiastowej pomocy gospodarstwom domowym poprzez subsydiowanie składnika paliwowego koszyka konsumpcyjnego. W niniejszym artykule przedstawiono studium przypadku Pakistanu, w którym skuteczność nieukierunkowanych dotacji na benzynę i olej napędowy została porównana z alternatywnymi mechanizmami wypłat bezpośrednich. Z analizy wynika, że w ramach mechanizmu wydatkowania dopłat pośrednich opartych na kontroli cen tylko 11% ogółu dopłat krajowych kierowano do 40% najuboższych gospodarstw domowych, podczas gdy około 55% ogółu dopłat kierowano do 20% segmentu dobrze uposażonych gospodarstw domowych. Następnie w studium przypadku przeanalizowano działanie alternatywnego mechanizmu wypłaty dotacji bezpośrednich, co przekłada się na potencjalne oszczędności fiskalne w wysokości 74,63 mld PKR, przy zapewnieniu pokrycia 40% najniższego segmentu gospodarstw domowych. W tym badaniu oceniono również wpływ przeniesienia rzeczywistych cen na krajową konsumpcję benzyny i oleju napędowego w krótkim okresie, co uwidacznia się w znaczącym zmniejszeniu zużycia ropy naftowej w całkowitym rachunku z 37% do 23%, zapewniając w ten sposób duże odciążenie salda rachunku bieżącego. Ten wynik daje kluczowe wskazówki dla gospodarek, że w celu zinstytucjonalizowania niezbędnego systemu ochrony socjalnej trzeba stopniowo przejść do mechanizmu wypłat dotacji bezpośrednich, przy jednoczesnym dążeniu do powstrzymania inflacji wywołanej przez gwałtowne zmiany światowych cen ropy, poprzez powstrzymywanie wzrostu kosztów.

Słowa kluczowe

EN

inflation; subsidy; distribution incidence analysis; fiscal consolidation; current account

PL

inflacja; dotacje; analiza częstości dystrybucji; konsolidacja fiskalna; rachunek bieżący

• Wydawca: Instytut Gospodarki Surowcami Mineralnymi i Energią PAN
• Czasopismo: Polityka Energetyczna
• Rocznik: 2022
• Tom: T. 25, z. 4
• Strony: 5--26
• Opis fizyczny: Bibliogr. 42 poz., tab., wykr.

Twórcy

autor

Khalid Talha

• Policy and Planning, Central Power Purchasing Agency, Pakistan

• https://orcid.org/0000-0001-6519-5601

Bibliografia

• Adeosun et al. 2022 – Adeosun, O.A., Tabash, M.I. and Anagreh, S. 2022. Oil price and economic performance: Additional evidence from advanced economies. Resources Policy 77, DOI: 10.1016/j.resourpol.2022.102666.
• Altunusch Meliha Benr 2022. The Ukraine Crisis and its Impact on Turkey and the Middle East. [Online] https://jiia.repo.nii.ac.jp/?action=pages_view_main&active_action=repository_view_main_item_detail& item_id=1439&item_no=1&page_id=13&block_id=21 [Accessed: 2022-11-06].
• Bashiri Behmiri, N. and Pires Manso, J.R. 2013. How crude oil consumption impacts on economic growth of Sub-Saharan Africa? Energy 54, pp. 74–83, DOI: 10.1016/j.energy.2013.02.052.
• Benazir Income Support Programme 2022. Benazir Income Support Programme. [Online] https://bisp.gov.pk/Detail/ZjE4YTk4MzAtM2MzMC00NzYyLThhNDktMzFkNDBhOGNlNGQ2 [Accessed: 2022- -11-10].
• Benton et al. 2022 – Benton, T., Froggatt, A., Wellesley, L., Grafham, O., King, R., Morisetti, N., Nixey, J. and Schroder, P. 2022. The Ukraine War and threats to food and energy security. (Issue April), London: Chatham House, DOI: 10.55317/9781784135225.
• Bloomberg 2022. South Africa Extends Fuel Subsidy to Offset Soaring Oil Prices. [Online] https://www.bloomberg.com/news/articles/2022-05-31/south-africa-extends-fuel-subsidy-to-offset-soaring-oil-prices [Accessed: 2022-11-07].
• Business Recorder 2022. SBP increases key interest rate by 125 basis points, takes it to 15%. pp. 1–7. [Online] https://www.brecorder.com/news/40184923 [Accessed: 2022-11-10].
• Canuto, O. 2022. War in Ukraine and Risks of Stagflation. [Online] https://www.policycenter.ma/sites/default/files/2022-03/PB_18-22_Canuto_0.pdf [Accessed: 2022-11-10].
• Chaudhry et al. 2021 – Chaudhry, I. S., Faheem, M., Hussain, J. and Ahmad, R. 2021. A Step towards enhancement of Macroeconomic Performance of Pakistan: Do Oil Price, Public Expenditures and Financial Development Matter? Review of Applied Management and Social Sciences 4(1), pp. 157–168, DOI: 10.47067/ramss.v4i1.108.
• Choi, H.-Y. and Yoo, S.-H. 2016. Oil consumption and economic growth: The case of Brazil. Energy Sources, Part B: Economics, Planning, and Policy 11(8), pp. 705–710, DOI: 10.1080/15567249.2012.740144.
• CNBC 2022. India central bank raises key rate 50 bps as inflation seen staying elevated. pp. 1–12. [Online] https://www.cnbc.com/2022/08/05/india-central-bank-raises-key-rate-50-bps-as-inflation-stays-elevated. html%0A [Accessed: 2022-11-12].
• Congressional Research Service 2022. Middle East and North Africa : Implications of 2022 Russia-Ukraine War (Issue 6). [Online] https://apps.dtic.mil/sti/pdfs/AD1172614.pdf [Accessed: 2022-11-12].
• Eregha et al. 2022 – Eregha, P.B., Aworinde, O.B. and Vo, X.V. 2022. Modeling twin deficit hypothesis with oil price volatility in African oil-producing countries. Resources Policy 75, DOI: 10.1016/j.resourpol.2021.102512.
• Finance Ministry of Pakistan 2022. Annual Ferderal Budget. [Online] http://www.finance.gov.pk/rebuttals_ details1.html [Accessed: 2022-11-12].
• Finance Ministry of Pakistan 2023. Annual Federal Budget. In Finance Ministry of Pakistan.
• Geopolitical Intelligence Services 2022. Peak oil demand will change global market dynamics, pp. 1–7. [Online] https://www.gisreportsonline.com/r/peak-oil-demand/ [Accessed: 2022-11-12].
• Hydrocarbon Development Institute of Pakistan 2020. Pakistan Energy Yearbook. [Online] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/336598/energy_flow_chart_2013.PDF [Accessed: 2022-11-12].
• IMF 2022. Response to High Food, Energy Prices Should Focus on Most Vulnerable – IMF Blog. [Online] https://blogs.imf.org/2022/06/07/response-to-high-food-energy-prices-should-focus-on-most-vulnerable/?utm_medium=email&utm_source=govdelivery [Accessed: 2022-11-12].
• International Energy Agency (IEA) 2021. World Energy Outlook 2021. [Online] www.iea.org/weo [Accessed: 2022-11-12].
• Khudaykulova et al. 2022 – Khudaykulova, M., Yuanqiong, H. and Khudaykulov, A. 2022. Economic Consequences and Implications of the Ukraine-Russia War. International Journal of Management Science and Business Administration 8(4), pp. 44–51, DOI: 10.18775/ijmsba.1849-5664-5419.2014.84.1005.
• Kpodar, K. and Liu, B. 2022. The distributional implications of the impact of fuel price increases on inflation. Energy Economics 108, DOI: 10.1016/j.eneco.2022.105909.
• Liadze et al. 2022 – Liadze, I., Macchiarelli, C., Mortimer-lee, P. and Juanino, P.S. 2022. The Economic Costs of the Russia- Ukraine Conflict (Issue 3). [Online] https://www.niesr.ac.uk/wp-content/ uploads/2022/03/PP32-Economic-Costs-Russia-Ukraine.pdf%0A [Accessed: 2022-11-12].
• Liu et al. 2022 – Liu, Y., Sharma, P., Jain, V., Shukla, A., Shahzad Shabbir, M., Tabash, M.I. and Chawla, C. 2022. The relationship among oil prices volatility, inflation rate, and sustainable economic growth: Evidence from top oil importer and exporter countries. Resources Policy 77, DOI: 10.1016/j.resourpol.2022.102674.
• Majumder et al. 2022 – Majumder, M.K., Raghavan, M. and Vespignani, J. 2022. The impact of commodity price volatility on fiscal balance and the role of real interest rate. Empirical Economics 63(3), pp. 1375–1402, DOI: 10.1007/s00181-021-02168-3.
• Melnyk, K. and Nehoda, A. 2022. The Impact of the Covid-19 Pandemic and the War in Ukraine on World Logistics. Economy and Society 39, DOI: 10.32782/2524-0072/2022-39-3
• Nazeeruddin, M. 2022. The Russia-Ukraine War crisis-It’s Impact on Indian Economy. International Journal of Research and Analytical Reviews (IJRAR) 346(2), pp. 2348–2349. [Online] https://ssrn.com/ abstract=4080234 [Accessed: 2022-11-12].
• OECD 2022. Why governments should target support amidst high energy prices (Issue June). [Online] https://www.oecd.org/ukraine-hub/policy-responses/why-governments-should-target-support-amidst-high-energy-prices-40f44f78/ [Accessed: 2022-11-12].
• Oil Companies Advisory Council n.d. Oil Companies Advisory Council. Oil Companies Advisory Council, Retrieved September 6, 2022. [Online] https://www.ocac.org.pk/oil-industry-statistics/ [Accessed: 2022-11-10].
• Orhan, E. 2022. The effects of the Russia–Ukraine war on global trade. Journal of International Trade, Logistics and Law 8(1), pp. 141–146. [Online] http://jital.org/index.php/jital/article/view/277 [Accessed: 2022-11-25].
• Ozili, P.K. 2022. Global Economic Consequence of Russian Invasion of Ukraine. SSRN Electronic Journal February 2022. DOI: 10.2139/ssrn.4064770.
• Pakistan Bureau of Statistics n.d. Annual Report, Retrieved September 1, 2022. [Online] https://www.pbs.gov.pk/content/microdata [Accessed: 2022-11-12].
• Pakistan Bureau of Statistics 2022. External Trade Statistics. [Online] https://www.pbs.gov.pk/trade-tables [Accessed: 2022-11-12].
• Park, S.-Y. and Yoo, S.-H. 2014. The dynamics of oil consumption and economic growth in Malaysia. Energy Policy 66, pp. 218–223, DOI: 10.1016/j.enpol.2013.10.059.
• Reuters 2021. OPEC forecasts oil demand rebound before post-2035 plateau. Pp. 1–19. [Online] https://www.reuters.com/business/energy/opec-sees-oil-demand-rebounding-then-plateauing-after-2035-2021-09-28/ [Accessed: 2022-11-12].
• S&P Global 2022. Fuel for Thought: Tax cuts, subsidies reflect Asia’s belief expensive oil is here to stay. [Online] https://www.spglobal.com/commodityinsights/en/market-insights/blogs/oil/053122-fft-oil-prices-asia-tax-cuts-subsidies [Accessed: 2022-11-10].
• Shah et al. 2022 – Shah, S.N.A., Majeed, G., Ali, R.A. and Hussain, T. 2022. Russia-Ukraine Crisis and Its Impact on South Asia. Review of Applied Management and Social Sciences (RAMSS) 5(2), pp. 141–148, DOI: 10.47067/ramss.v5i2.219.
• Waleed et al. 2018 – Waleed, A., Akhtar, A. and Pasha, A.T. 2018. Oil consumption and economic growth: Evidence from Pakistan. Energy Sources, Part B: Economics, Planning, and Policy 13(2), pp. 103–108, DOI: 10.1080/15567249.2017.1354100.
• Wang et al. 2022 – Wang, Y., Geng, X. and Guo, K. 2022. The influence of international oil price fluctuation on the exchange rate of countries along the “Belt and Road”. North American Journal of Economics and Finance 59, DOI: 10.1016/j.najef.2021.101588.
• World Bank 2022a. Reshaping Norms: A New Way Forward. DOI: 10.1596/978-1-4648-1857-8.
• World Bank 2022b. Global Economic Prospects. DOI: 10.2307/j.ctt183pb3w.5.
• World Bank 2022c. World Bank Commodities Price Data (The Pink Sheet). [Online] https://www.worldbank.org/en/research/commodity-markets%0A [Accessed: 2022-11-12].
• World Economic Forum 2022. US makes most aggressive interest rate hike since 1994. [Online] https://www.weforum.org/agenda/2022/06/rates-inflation-federal-reserve-united-states/%0A [Accessed: 2022-11-10].

Uwagi

Opracowanie rekordu ze środków MEiN, umowa nr SONP/SP/546092/2022 w ramach programu "Społeczna odpowiedzialność nauki" - moduł: Popularyzacja nauki i promocja sportu (2022-2023).