REPUBLIKA.CO.ID, WASHINGTON - The costly fuel subsidy was considered not effective to help the poor. International Monetary Fund (IMF) argued, in the end it was the rich enjoyed the facility. The Fund said that not only costly, the policy also harmed the state spending on some other productive sectors.
''Subsidies should go with appropriate compensation for the poor,'' according to IMF as reported by Elba Damhuri from Republika in Washington, Saturday.
In recent years, many countries face the crusial fiscal weight of energy subsidies then it grew too large to bear. Evenmore, in some cases the budget deficits become uncontrolable and threaten the stability of economy.
Among other reasons, IMF said that low and subsidized prices made investment in energy sector unattractive which in turn would decrease the fuel supply. Subsidy also draws public spending from some productive sectors like infrastructure, education, health care, and the social safety net.
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