How Much Would Bangladesh Gain from the Removal of Subsidies on Electricity and Natural Gas?
As in many countries around the world, subsidies to energy in Bangladesh impose a significant fiscal burden, with benefits that disproportionately accrue to high-income households. Any reforms of energy subsidies should benefit the overall economy...
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| Language: | English |
| Published: |
World Bank, Washington, DC
2018
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/409331545076295371/How-Much-Would-Bangladesh-Gain-from-the-Removal-of-Subsidies-on-Electricity-and-Natural-Gas http://hdl.handle.net/10986/31079 |
| Summary: | As in many countries around the world,
subsidies to energy in Bangladesh impose a significant
fiscal burden, with benefits that disproportionately accrue
to high-income households. Any reforms of energy subsidies
should benefit the overall economy rather than those who use
energy the most. Using a computable general equilibrium
model, this study investigates the economywide impacts of
the removal of direct subsidies in the electricity sector
and indirect subsidies in natural gas in Bangladesh. The
study finds that removal of energy subsidies would be
beneficial to the economy and would increase gross domestic
product. The magnitude of the economic impact depends on how
the budgetary savings from the removal of the electricity
subsidies and increased revenues due to the removal of
indirect subsidies to natural gas are reallocated to the
economy. Recycling the savings (or the new revenues) to fund
investment would benefit the country most, followed by the
case of utilizing them to fund cuts in income taxes, and
finally to fund cuts in indirect taxes. Although the
reallocation of budgetary savings to households through
lump-sum transfers is found to be inferior to the other
recycling options considered, it would be the preferred
option from the distributional perspective. |
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