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Saturday, December 10, 2016
Wednesday, June 25, 2008

Subsidies pose an increasing fiscal burden that emerging Asian economies should move away from, the former International Monetary Fund chief said Tuesday.

Rodrigo Rato said subsidies only resulted in market distortion, and that their beneficiaries included wealthier segments of society least in need of assistance.

He said doing away with subsidies would not be easy because of social and political pressures, but maintained that keeping prices artificially low was not feasible.

"I know that poses a big challenge in societies with a huge amount of people that live with very low incomes but the experience in the world is that subsidies are not the response to social policies," said Rato.

He said subsidies "benefit everybody, rich and poor, and I think that emerging economies have to understand, and I think they do, that subsidies have to be substituted by other, more efficient, social policies."

China on Friday became the latest Asian nation to curb energy subsidies by increasing retail petrol and diesel prices as much as 18 percent, moving to close the gap between state-set domestic prices and soaring world oil costs.

Faced with ballooning subsidy bills, Malaysia recently raised fuel prices by 41 percent and Indonesia by around 29 percent, leading thousands to protest in both countries. Taiwan and India have also raised energy costs.

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