Dubai, UAE, February 2026: As governments across the Middle East and globally face rising fiscal pressures, climate commitments, and increasing demands on public spending, new KPMG report in collaboration with the World Government Summit points to subsidy rationalisation as one of the most impactful policy levers to strengthen long-term economic resilience, while maintaining targeted protection for vulnerable populations.
Launched on the sidelines of the World Government Summit this year, the latest KPM-WGS report, Fiscal Surgery: Unlocking Global Spend Efficiency Through Bold Subsidy Rationalisation, examines how governments can improve fiscal efficiency, strengthen social equity, and support climate objectives, aligning with core World Government Summit themes around future-ready governance and effective policy execution.
According to the report, global subsidies reached an estimated USD 7 trillion in 2022, equivalent to more than seven percent of global GDP, with energy subsidies accounting for the largest share. While subsidies have historically played a role in shielding consumers from price volatility, the report finds that untargeted subsidies increasingly strain public budgets, disproportionately benefit higher-income households, and weaken incentives for efficient resource use.
For the UAE and the wider GCC, this debate is already playing out in practice. Over the past decade, governments in the region have implemented measured pricing reforms, linked fuel prices to international benchmarks, and introduced differentiated tariff structures, supported by targeted social protection mechanisms. These steps have contributed to stronger fiscal discipline and improved economic efficiency, while preserving social cohesion.
The report identifies a “triple effect” of subsidy reform, highlighting opportunities for governments to simultaneously strengthen fiscal resilience, social equity, and environmental outcomes through a well-designed and carefully sequenced approach. Findings show that greater flexibility and efficiency in budget management can unlock resources for long-term priorities such as infrastructure, education, and healthcare. At the same time, improved targeting enables governments to direct support more effectively toward households most exposed to price changes, while aligning prices more closely with real costs strengthens incentives for efficiency and conservation, supporting national sustainability and climate objectives.
Rather than advocating sudden subsidy removal, the report outlines a structured framework for strategic subsidy reform built around phased price adjustments, targeted social protection, transparent communication, and strong institutional coordination. International and regional case studies show that reforms are most durable when governments focus on protecting people directly through cash transfers or lifeline tariffs, rather than suppressing prices across entire markets.
Dr. Raed Skaf, Head of Spending Efficiency, KPMG Middle East, said: “Subsidy rationalisation is emerging as one of the most powerful underutilized levers for strengthening fiscal resilience, advancing social equity, and accelerating climate impact. The focus is shifting from whether reform is needed to how it is designed and effectively implemented. The Middle East already has relevant experience with subsidy reform, and our research shows that when subsidies are better targeted, and governments act decisively to unlock spending efficiency and redirect trillions toward national priorities, they can protect the intended population and deliver measurable, sustainable impact.”
The report draws on experiences from both advanced and emerging economies, including resource-rich countries, to demonstrate how subsidy reform can support broader national objectives when aligned with local economic structures and governance capacity. In the GCC, transparent pricing mechanisms combined with targeted social support have played a key role in normalising reform and reinforcing policy credibility.
As the World Government Summit brings together policymakers from around the world to address shared fiscal, climate, and governance challenges, the report underscores the importance of designing and sequencing subsidy reforms that align with national priorities, institutional capacity, and social expectations.
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