Yemen is currently undergoing a major political transition, yet many economic challenges—including fuel subsidy reform—remain highly relevant. To inform the transition process with respect to a potential subsidy reform, we use a dynamic computable general equilibrium and microsimulation model for Yemen; we show that overall growth effects of subsidy reduction are positive in general, but poverty can increase or decrease depending on reform design. A promising strategy for a successful reform combines fuel subsidy reduction with direct income transfers to the poorest one-third of households during reform, and productivity-enhancing investment in infrastructure, plus fiscal consolidation. Public investments should be used for integrating economic spaces and restructuring of agricultural, industrial and service value chains in order to create a framework that encourages private-sector-led and job-creating growth.

Food is a vital part of poor households' budgets and so subsidizing staple foods would appear to be an obvious pro-poor policy. Indeed, most countries in North Africa have prioritized large national subsidy programs for staple foods and fuels as their main social safety net. However, these programs account for significant shares of government spending and often drive fiscal deficits, especially when import prices rise. In this paper we use a dynamic Computable General Equilibrium model to evaluate the trade-offs between reducing poverty and managing fiscal balances. The modeling framework allows us to measure the efficiency costs of subsidies compared to cash transfers - switching to the latter is an emerging regional trend. We analyze these issues through a detailed case study of Egypt, where efforts to replace food subsidies with cash transfers is already underway. Data is also available in Egypt to design scenarios that realistically reflect potential targeting effectiveness and administrative costs. We show that replacing broad food subsidies with targeted cash transfers of roughly equivalent fiscal costs can improve the welfare of the poorest households, but the continuation of fiscal deficits results in a deceleration of economic growth. The latter gradually reduces welfare gains for the poor and leads to substantial welfare losses for middle-income households who lose access to subsidies without benefitting from cash transfers. Our findings highlight the political challenges facing subsidy reform programs.

While the recent political transition in Egypt has delayed much-needed policy reforms, our paper suggests that under certain conditions, fostering the national renewable energy strategy may be a promising way of giving an ailing economy an urgently needed impetus. Based on the literature and results of a renewable-energy focused computable general equilibrium model, we recommend that Egypt supports the generation of wind power. While some energy may be exported to generate foreign exchange, a substantial part of the newly produced energy should be sold domestically to ease existing supply constraints and to avoid Dutch disease effects. In addition, and in order to maximize the benefits of renewable energy sources, the renewable energy strategy should be accompanied by a (further) reduction of energy subsidies. Finally, lessons from other countries suggest that sound institutions; appropriate, clear and lasting regulations; careful technology transfer; and cross-ministerial coordination are important for success.

Agriculture and agri-food systems of the highly vulnerable Middle East and North Africa (MENA) region needs a radical transformation under a changing climate. Based on a two-year effort, initially we developed a mega hypothesis on how to achieve climate-smart agri-food transformation in the region. In the study, we hypothesized that “Climate-Smart Lifts” implemented in the enabling environments can rapidly facilitate agri-food transformation in the region. In order to gather the stakeholders’ perception about this, we organized a collective conversation among ~400 stakeholders that represent various scales and sectors within the agriculture sector in MENA. These “listening cum learning consultations” were conducted through a survey followed by a series of webinars. The webinar discussions were strategically guided based on our hypothesis, the responses from the surveys and the regional needs. These discussions provided a forum to bring-out the stakeholders’ perspective on what new knowledge, partnerships, instruments and projects were needed in the MENA. The deliberation focused on the opportunities of public–private partnerships focusing in all the four major agroecosystems in MENA (irrigated, rainfed, rangelands, and deserts). In result, we developed an effective framework for strategic resource mobilization in the region, keeping in view the strong regional needs for climate actions and the requisite long-term commitments for the SDGs implementation.