Who will benefit from Rf 100 million subsidy?

The Rf 100 million fuel subsidy is not going to make any difference in the lives of our poor fishermen who our Majlis has supposedly intended to help with it.

An IMF working paper based on empirical evidence from five countries (Bolivia, Ghana, Jordan, Mali, and Sri Lanka) concludes that energy subsidies are badly targeted in most developing countries that resort to it ostensibly to protect the poor from the sky high oil prices. Instead of helping the poor, all that energy subsidies do are, according to the study, absorb an increasing share of scarce public resources. IMF’s paper goes on to say that ‘the most efficient and effective way to protect the poor is to allocate some of the budgetary savings from the elimination of fuel subsidies to a well-targeted social safety net that has high coverage of poor households and little leakage to nonpoor households’.

It doesn’t take a doctorate in economics to understand what the Rf 100 million fuel subsidy is going to do to Maldives.

· A huge fiscal drain on an agonizingly overstretched budget
· Badly targeted (its not going to benefit low- and very-low-income households as there will be huge leakages - there’s no way government can prevent the already rich Odiverin and big fishing companies from getting the lions share)
· Crowd-out priority expenditures

If only those bags of wind you and I elected to represent us in Majlis would do a bit of their homework…