Learning from Power Sector Reform: The Case of the Arab Republic of Egypt

Abstract

The challenge of power sector reform in
\n the Arab Republic of Egypt has long been dominated by
\n extremely high subsidies, with prices set well below the
\n costs of supply. These subsidies have taken a variety of
\n forms: explicit subsidies in the government budget, implicit
\n subsidies in the underpricing of fuel supply (particularly
\n natural gas) to the power sector, accumulation of arrears
\n from the sector, poorly-maintained physical capital, and
\n cross-subsidies across customer classes. Egypt's social
\n contract was linked to expanding energy access with good
\n quality supply based on public financing and huge subsidies.
\n Egypt has been able to achieve universal access with more or
\n less reliable power over the entire period, except when
\n chronic underinvestment in the sector caused blackouts in
\n 2011–14 at time of severe political uncertainty. The social
\n compact came under pressure in 2014 when energy subsidies
\n reached 6.8 percent of gross domestic product. Since then,
\n the reform process has been revived based on new
\n electricity, gas, and renewable energy laws; price and
\n subsidy adjustments; structural reforms with a deliberately
\n long time frame; and greater emphasis on the role of the
\n private sector.

Topics & Concepts