Table 11: Poverty and Inequality Impacts of Energy Reform

||Percentage<br>points (pp)|Change in pp<br>w/ prereform||Percentage<br>points (pp)|Change in pp<br>w/ prereform|
|---|---|---|---|---|---|
|**Poverty pre-reform**|**14.93**|**---**|**Gini pre-reform**|**35.81**|**---**|
|Gasoline|15.02|0.09|Gasoline|35.75|-0.06|
|LPG|16.84|1.91|LPG|36.43|0.62|
|Diesel|15.12|0.19|Diesel|35.82|0.01|
|Electricity|15.13|0.2|Electricity|35.83|0.02|
|**Poverty post-reform**|**17.61**|**2.68**|**Gini post-reform**|**36.42**|**0.61**|
|_Misc. direct effect_||1.95|_Misc. direct effect_||0.58|

_Source:_ WB staff calculations using SUBSIM.

_Notes:_ The reason the prereform poverty and inequality rates are not the official rates for 2010 is that prices have all been updated for this specific exercise to 2013 prices using growth rates and population growth rates. The poverty line has also been updated using CPI trends. Hence, the starting point of this exercise is a poverty rate of 14.9 in 2013, and not the 15.4% official estimate obtained in the 2010 original household budgetary survey. This adjustment enables comparisons across other countries analyzed in this book. However, the rest of the simulation exercise will be conducted using the 2010 household budgetary survey. It is worth noting as well that despite using the 2010 household budgetary survey, a subsample of that survey is used and not the full sample of the original 2010 household survey. In effect, it is a subsample of the original sample that is used to capture beneficiaries of the subsidized universal health care card. Even after re-weighting the subsample, the exact official poverty number of 15.4% could not be fully replicated, only a slim margin (15.3%). Similarly, the estimated prereform Gini of 36.5% differs slightly from the official 35.8% from the full sample (table 13).

The increases in poverty and inequality following the reduction of subsidies imply some TND 817.5 million in fiscal savings (Table 12). Fiscal savings accrue disproportionally from the removal of subsidies in LPG (77% of all fiscal savings) and electricity (13%). Furthermore, the savings accruing from the removal of subsidies affecting the poorest quintile represent some 13% of all fiscal savings, a share that increases across quintiles, so that the savings accruing from removed benefits to the richest group represent 28% of the total savings. These shares are very similar to the proportions of benefits from subsidies that each socioeconomic group captured prior to the reform (table 7 earlier). Given that these simulations do not introduce behavioral effects (only direct and indirect effects are allowed), fiscal savings from the elimination of subsidies for the most part reflect the initial socioeconomic distribution of subsidies.

Table 12: Energy Subsidy Savings from the Reform (by source and quintile of consumption, in TND)

||Gasoline|LPG|Diesel|Electricity|Total|
|---|---|---|---|---|---|
|Quintile 1|-186,020|-97,003,152|-325,901|-11,624,507|-109,139,584|
|Quintile 2|-929,258|-120,432,824|-1,418,063|-16,163,867|-138,944,016|
|Quintile 3|-3,420,753|-130,381,216|-2,689,996|-19,003,020|-155,494,992|
|Quintile 4|-10,129,942|-148,695,856|-4,054,068|-23,481,422|-186,361,280|
|Quintile 5|-39,575,064|-139,133,344|-12,414,583|-36,451,727|-227,574,720|