Fiscal Monitor

Chapter 2: Public Sentiment Matters: The Essence of Successful Energy Subsidies and Pension Reforms 

This chapter examines strategies to build public support for reforms to energy subsidies and public pensions, which are crucial for reducing fiscal vulnerabilities and fostering inclusive growth. Energy subsidy reforms enhance efficiency and reduce inequality, while pension reforms ensure sustainability and alleviate old-age poverty. Resistance arises because costs are tangible, while benefits are diffuse. The chapter introduces a real-time measure of reform acceptability using large language models to quantify stakeholder sentiment. Findings show that careful design, timing, accompanying measures, and governance improve stakeholder sentiment and help advance ambitious and durable reforms. Redistribution policies and strategic communications can mitigate resistance.