In a chart published on Wednesday, the International Monetary Fund (IMF) explained how lifting fuel subsidies was an urgent matter for all countries, whatever their economic and income level types.
Pensions, education, healthcare, better infrastructure, technology, and climate change are serious world challenges, and fiscal policymakers have their work cut out for them on many fronts in ageing advanced economy, low-income or emerging market economy with a young, booming population alike, according to the IMF analysis.
“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 four percent of global GDP in additional resources over the medium term to invest in people and growth, and help protect the most vulnerable,” the fund revealed.
It also unveiled that the subsidies amount to 6.5 percent of GDP globally.
“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 percent of global GDP, because energy consumption contributes to global warming, local pollution, increased traffic congestion and more accidents,” it added.
Money spent on other priorities can help increase long-term economic growth, which is a key ingredient to reduce the burden of high public debt. It can also spread economic benefits more widely within and across countries and help restore the public trust in institutions necessary for economic stability, according to the IMF analysis.
Source: Ahram Online