One of the few places where the Cato Institute and I agree! Cheaper food creates problems with obesity. Cheaper fuel exacerbates problems with pollution. Some great paragraphs from the Economist:
Whereas greener countries slap hefty taxes on petrol and diesel,
Egypt does the opposite. Motorists pay only 59% of what it costs to fill
their cars. Since driving is cheap, more people do it, aggravating
congestion and making urban air eye-wateringly foul. The World Bank
estimates that traffic jams in Cairo alone cost Egypt 3.6% of GDP.
Egyptian cities are the fifth dirtiest in the world, says the World
Health Organisation. And since the truly poor cannot afford cars, most
petrol subsidies are captured by the better-off. The top 20% of
urbanites receive eight times as much as the bottom fifth.
Similarly,
bread subsidies are a waste of dough. Egyptians buy up to five loaves a
day for a tenth of their cost. The state also subsidises sugar, cooking
oil and other calorific staples. This is one reason why Egypt has one
of the world’s highest rates of adult obesity. And despite the
introduction of smart cards to limit how much subsidised food an
individual can take, the subsidies are often stolen.
[I]if all food and energy subsidies were stopped and half of the savings
used to pay for cash transfers to the poorest 60% of households, each of
those households would receive $622 a year, more than doubling incomes
for the bottom 25%.
