IMF Sees Big Gains from Energy Subsidies Reform

A new IMF paper urges governments the world over to reform subsidies affecting products ranging from coal to gasoline. Subsidies are intended to protect consumers by keeping prices low. But many argue subsidies are inefficient and could be replaced with better means of protecting consumers in need. This, according to the IMF, is possible if governments undertake the right reform path, and will in the process also help alleviate budgetary pressures being faced by governments.

The IMF work was carried out by regional and fiscal affairs experts from across the organization. In an interview, Carlo Cottarelli, Director of the IMF’s Fiscal Affairs Department, Masood Ahmed, Director of theMiddle Eastand Central Asia Department, and Antoinette Sayeh, Director of the African Department spoke about what the paper will mean for the IMF’s work in countries and for the countries themselves.

Carlo Cottarelli comments: “Subsidies are a problem in practically every country in the world. Even where countries impose taxes on energy, they’re rarely high enough to account for all of the adverse effects of excessive energy consumption, including on the environment. Based on a new database for 176 countries, we estimate that subsidies in 2011 amounted to $1.9 trillion, the equivalent of about 2.5 percent of world GDP, or 8 percent of all government revenues.”

He continues: “Since energy subsidies are pervasive and costly for governments to maintain, we see scope for reform not only in emerging market and developing countries, but also in advanced economies. The top three subsidizers across the world are the United States at $502 billion, China at $279 billion, and Russia at $116 billion. Clearly, when a country embarks on subsidy reform, there is a need to be mindful of possible adverse effects on the poor, and mitigating measures to protect the poor have to be built into the reform plan. This applies to all countries.”

Posted in Energy, News

Leave a Reply

Your email address will not be published. Required fields are marked *

*