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IMF urges countries to support vulnerable, avoid blanket subsidies as food, fuel prices soar

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euThe seal for the Worldwide Financial Fund is seen close to the World Financial institution headquarters (R) in Washington, DC on January 10, 2022. (Photograph by Stefani Reynolds / AFP) (Photograph by STEFANI REYNOLDS/AFP through Getty Photographs)

LONDON, June 7 (Reuters) – The IMF mentioned on Tuesday governments preventing hovering meals and gasoline costs ought to goal assist to weak residents reasonably than subject across-the-board assist that risked including to strains on public funds.

Over half of 134 international locations surveyed mentioned that they had launched subsidies or tax cuts to melt the blow of hovering worth rises triggered by the battle in Ukraine, the Worldwide Financial Fund mentioned in a weblog.

Russia’s invasion of Ukraine has led to sharp spikes in meals and gasoline costs, compounding international financial woes, particularly for growing economies which were struggling greater than richer ones to recuperate from the COVID-19 pandemic.

“Policymakers ought to permit excessive international costs to go by way of to the home economic system whereas defending weak households affected by the will increase,” the IMF weblog mentioned.

“That’s in the end more cost effective than conserving costs artificially low for all no matter their means to pay.”

Learn extra: IMF says Malawi requests four-year credit score facility

The IMF usually makes eradicating subsidies a situation of giving assist.

Pakistan on June 2 slashed gasoline subsidiesfor the second time in per week to safe a bailout from the IMF. Tunisia mentioned on Tuesday it might begin chopping power and meals subsidies subsequent yr alongside monetary transfers to poor households, because it seeks a $4 billion IMF mortgage. Learn full storyRead full story

The IMF weblog famous that governments had handed much less of the rise in oil costs onto shoppers within the first 4 months of this yr than that they had in 2021, including that subsidies inspired extra power consumption and thus fed the value rises.

Meals safety issues could imply that some governments haven’t any possibility however to introduce subsidies and even hand out fundamental staples, the weblog mentioned, nevertheless it suggested that “clear sundown clauses” for his or her termination have been wanted.

(Reporting by Rachel Savage; Modifying by Mark Heinrich)

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