IMF warns Spain’s subsidy plan is fiscally inefficient, urges cash aid to poor

In its new World Economic Outlook, the IMF challenges the subsidy strategy promoted by Spain’s left-wing parties PSOE and Sumar, which aim to curb rising costs of fuel, electricity and gas by supporting producers and distributors. The Fund finds that such price controls demand far higher public spending—up to twenty-two times more—than direct cash transfers to low-income households, and that the benefits disproportionately flow to higher-earning families.

Data show that less than 20 cents of each euro spent on subsidies reaches the poorest, while richer households obtain up to 40 cents per euro on gasoline measures. The IMF also warns that producer subsidies can leak abroad through lower export prices. It advises governments to use temporary, clearly defined cash programmes that target the most vulnerable, preserving price signals and limiting fiscal strain. While not ruling out emergency interventions, the Fund stresses they should be limited in time and scope.