The IMF detects that widespread energy subsidies are retracting: nearly half of the measures now identify their beneficiaries, compared to the initial 30%. Spain has accumulated over 12 billion in aid.
The International Monetary Fund (IMF) confirms that widespread subsidies to protect households and businesses from rising fuel costs are reaching their limit. According to the Fund's Fiscal Monitor, reported by ecosistemastartup.com, nearly 50% of the most recent measures now explicitly identify their beneficiaries, compared to 30% that did so in the first phase of the energy shock.
The shift is twofold: governments are passing more of the energy costs onto internal prices and implementing policies to moderate demand. The so-called “fiscal shields” (widespread subsidies, tax cuts, and broad transfers) are losing weight.
Spain approved a third royal decree law at the end of September as part of the Comprehensive Response Plan to the Crisis in the Middle East, with a cumulative budget effort exceeding 12 billion euros, according to La Moncloa.
“Countries with greater fiscal and external reserves had more options, while those with high debt or more restrictive financing conditions resorted more to immediate price adjustments and measures to reduce demand,” the report states.
The document, prepared by Era Dabla-Norris (Deputy Director of the IMF's Fiscal Affairs Department), Antonio C. David, Daria Zakharova, and Aleksandra Zdzienicka, points to a pattern: the higher the sovereign debt and worse the financing conditions, the more the energy cost is passed on to the final consumer.
Global public debt reached 93.9% of GDP in 2025, nearly two percentage points higher than the previous year, and is projected to reach 100% of GDP by 2029, according to the IMF's Fiscal Monitor. With less fiscal space, universal subsidies become unsustainable.
The directive from the new head of fiscal affairs at the IMF, Rodrigo Valdés, is to avoid subsidies for fuels and prefer specific and temporary cash transfers that do not mask the increase.
“We have no oil. We have no energy. Energy has to be more expensive for everyone, so that an adjustment occurs and we consume less,” Valdés told Reuters in April.
Among the measures being implemented by governments are rationing and energy conservation requirements, shorter work weeks and remote work modalities, as well as currency interventions and financial stabilization mechanisms.
The eurozone is one of the most exposed blocks. The IMF cut its growth forecast for 2026 from 1.4% to 1.1% and projects a 19% increase in energy costs. Expected global inflation rose to 4.4% and the 21 euro countries are among those most affected by their dependence on imported gas.
The organization warns that if energy volatility extends to 2027, global growth could fall to 2%, a scenario that would force central banks to maintain high rates to combat persistent inflation.
For SMEs and self-employed individuals, the IMF recommends auditing energy exposure with three scenarios (current price, +19%, and full pass-through to the consumer) and including energy indexation clauses in B2B contracts longer than 12 months.
You may also like
