March 2020 - UNICEF has commissioned the Partnership for Economic Policy (PEP) to analyze the “Impact of Fuel Subsidy Reform on Household Poverty in Sudan”.
The four-month project aims to inform the 2020 Sudan General Budget for the National Government of the impact that removal of a fuel subsidy will have on poverty in the country and provide recommendations for mitigating policies. It will also train government staff to replicate this analysis and undertake similar analyses in the future.
Following many years of fuel subsidies, Sudan now finds their fiscal cost unsustainable. Many consider fuel subsidies to be a poorly targeted and extremely expensive way to protect the poor. Worse, fuel subsidies generally benefit the rich more than the poor, leading to further inequality. The government of Sudan is now looking to make urgent economic reforms and has started a dialogue on the impacts of reducing or lifting fuel subsidies.
The researchers are carrying out microeconomic simulations of subsidy removal and various cash transfer scenarios to assess which options can protect the poor and vulnerable.
“This study will provide us with estimates of the potential rise in poverty due to the removal of the subsidies. It will also provide estimates of the resources needed to alleviate the increased cost of living that households will need to bear due upon removal of the subsidy,” said John Cockburn, PEP’s Scientific Advisor.
The project is conducted in close consultation with UNICEF’s country office in Sudan and various ministries to ensure the relevance and uptake of the findings for policy decisions.
The study is led by Edgar Cooke PhD, a senior PEP researcher and Lecturer in the Business Department at Ashesi University in Ghana. It will be carried out in collaboration with Ibrahim Kasirye PhD, senior PEP researcher and Director of Research at the Economic Policy Research Centre (EPRC), and John Cockburn PhD. The research will be carried out between March and June, 2020. The intensive training for government staff is planned for June 2020 in Khartoum.
“PEP’s selection for this study underlines how the organisation is increasingly recognized as a source of world-class expertise, drawn from the Global South, on the economic analysis of a wide variety of development challenges,” said John Cockburn.
The fuel subsidy reform study was initiated at the request of the Ministry of Labour and Social Development and is implemented in collaboration with the Ministry of Finance and Economic Development and the Commission on Social Safety and Poverty Reduction.
Photo: Arne Hoel / World Bank