chart of the weekFuel for Thought: Ditch the Subsidies

By IMFBlog Pensions, education, healthcare, better infrastructure, technology, and climate change: fiscal policymakers have their work cut out for them on many fronts.  Whether you live in a rapidly aging advanced economy,  or a low-income or emerging market economy with a young, booming population, all these issues matter for you.  As the Fiscal Monitor in April 2019 shows, government policies on taxes and spending have to adapt and should shift to growth-enhancing investment.  This means, for example, more money to build classrooms, hospitals and roads, while cutting wasteful spending, such as inefficient energy subsidies. Removing fossil fuel subsidies, which typically benefit the rich more than the poor, could gain up to 4 percent of global GDP. Our chart of the week shows that removing fossil fuel subsidies, which typically benefit the rich more than the poor, could gain up to 4 percent of global GDP in additional resources over the medium term to invest in people, growth, and help protect the most vulnerable.   We define the subsidies—which amount to 6.5 percent of GDP globally—broadly. The IMF’s calculations include both the government funding to artificially reduce the price of energy below cost (0.4 percent of global GDP) and the under taxation of fuel consumption (6.1 … Continue reading chart of the weekFuel for Thought: Ditch the Subsidies