Subsidy Reform and the Transformation of Social Contracts: The Cases of Egypt, Iran and Morocco

Abstract

After independence, subsidies have been a cornerstone of the social contracts in the Middle East and North Africa. Governments spent heavily to reduce poverty and strengthen their legitimacy. Yet, subsidies became financially unsustainable and donors pressed for reforms. This article assesses reform processes in Morocco, Egypt and Iran between 2010 and 2017, thus before sanctions against Iran were further tightened and before the COVID-19 pandemic. We show that even though the three countries had similar approaches to subsidisation, they have used distinct strategies to reduce subsidies and minimise social unrest—with the effect that their respective social contracts developed differently. Morocco tried to preserve its social contract as much as possible; it removed most subsidies, explained the need for reform, engaged in societal dialogue and implemented some compensatory measures, preserving most of its prevailing social contract. Egypt, in contrast, dismantled subsidy schemes more radically, without systematic information and consultation campaigns and offered limited compensation. By using repression and a narrative of collective security, the government transformed the social contract from a provision to a protection pact. Iran replaced subsidies with a more cost-efficient and egalitarian quasi-universal cash transfer scheme, paving the way to a more inclusive social contract. We conclude that the approach that governments used to reform subsidies transformed social contracts in fundamentally different ways and we hypothesize on the degree of intentionality of these differences.

Assessing Algerian government support for sustainable development goals: A study from 2000 to 2022

“…Nevertheless, the impact on poverty and inequality has been unsatisfactory, particularly because a substantial portion of the expenditure, averaging 6% of GDP, has taken the form of subsidies, as opposed to direct social transfers, which account for only 0.7% of GDP on average. (Vidican Auktor and Loewe, 2022). Table 1 presents a comparison between three MENA countries, Algeria, Saudi Arabia, and Egypt, regarding their support policies over decades.…”

“…Interestingly, examples from other countries show that with thoughtful planning and clear communication, reforms in subsidy programs can actually strengthen social protection systems. Such reforms help in achieving more inclusive and longterm economic growth without compromising on social welfare (Vidican Auktor and Loewe, 2022).…”

Conditional Cash Transfers in the Arab Region and the Dilemma of Social Justice

“…This included broadening the access of the poor to social protection through the Medical Assistance System (RAMED), 36 expanding direct cash transfer programmes, and introducing a new programme called DAAM, providing cash assistance to impoverished widows raising children, in addition to enhancing the TAYSSIR programme aimed at supporting education. The number of beneficiaries of this programme increased from 80,000 families in 2009 to 466,000 in 2014, 37 surpassing 1.6 million families in the academic year 2022-2023 according to data from the Directorate of Social Support at the Ministry of National Education. 38 CCT applications continued, both in regular situations like the aid programme for persons with disabilities and the Social Solidarity Fund, which provides financial allocations for children and destitute wives in cases of the husband's insolvency or failure to fulfil alimony obligations after marital dissolution.…”

Considering a Subscription to Butane Gas: A Beneficial or Detrimental Choice? An In-Depth Examination of the Energy, Economic, And Ecological Implications in a Highly Critical Sector in Morocco

“…This prolonged discourse stems from the disparities it creates within Moroccan society. The benefits of this subsidy [1] favor some individuals while leaving others without such advantages, and the reasons for this are multifaceted. Furthermore, it raises questions about fairness, as those who utilize alternative methods for cooking or heating their homes [2]don't receive any benefits from this government measure, despite often aligning with more forward-thinking approaches.…”