The International Monetary Fund has warned governments against resorting to broad subsidies, price controls, and tax cuts in response to rising energy and food prices, arguing that poorly designed interventions can worsen inflation, strain public finances, and deepen global shortages.
In a May report titled “Responding to the Energy and Food Price Shock: Getting the Policy Details Right,” the IMF said policymakers confronting surging prices face a difficult balancing act between protecting households and businesses and preserving already limited fiscal resources.
“When global energy prices spike, governments face an unenviable dilemma: shield people and businesses while straining already reduced room in public budgets or let prices rise for everyone and risk social and political backlash,” the fund said.
The report comes as countries grapple with renewed volatility in global energy markets and concerns that geopolitical tensions could fuel higher inflation and weaken economic growth.
According to the IMF, there is
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