Cash for the poor beats subsidies for everyone, IMF says. Subsidies cost three to six times more.
The fund's study of 76 countries lands as Nigeria argues over a petrol discount and South Africa over diesel.
Washington — Temporary cash support aimed at poorer households protects them from surging prices far more cheaply than subsidies do, the International Monetary Fund says in its latest World Economic Outlook, Premium Times reports.
The fund studied 76 countries over three decades. It found that:
- consumer subsidies need three to six times more public money than targeted cash transfers to give lower-income households the same protection;
- producer subsidies cost 14 to 22 times more.
The reason is that measures that hold down prices for everyone, such as tax cuts, subsidies and price controls, also help households that do not need help.
The European example
During Europe's energy crisis of 2022 and 2023, less than 20 cents of every euro spent on holding down electricity, gas and petrol prices reached the poorest fifth of households, the fund says.
What it recommends
Governments should deliver help through the social protection systems they already have, and make it temporary, with a clear end date.
The fund accepts that broader measures may be needed in exceptional cases, such as acute food insecurity or social unrest. Even then, it says, they should address only the temporary part of a price shock.
This report is based on reporting by Premium Times.
