IMF suggests targeted aid instead of broad subsidies to manage inflation

Experts from the International Monetary Fund (IMF) suggest that governments should implement targeted aid rather than broad subsidies during periods of high inflation. This approach aims to preserve scarce fiscal resources.

The IMF notes that the costs of essential goods, including food, electricity, and fuel, have risen sharply following the 2022 Russian invasion of Ukraine and recent conflicts in the Middle East. During such crises, food and energy prices often rise faster than wages, leading to severe economic difficulties and diminished purchasing power.

While advanced economies often manage prices through VAT reductions or selective consumption tax cuts, emerging markets and low-income countries frequently rely on broader interventions. The IMF warns that these rising costs can complicate central bank efforts to control inflation.