The International Monetary Fund (IMF) has warned Kenya and other countries against sustained fuel price increases and subsidies, citing rising global energy costs linked to the Middle East crisis.

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IMF Managing Director Kristalina Georgieva, on Thursday, May 27, cautioned that poorly designed interventions could worsen inflation, strain public finances, and trigger fuel shortages.

"Sustained energy price surges can sharply reduce household purchasing power, which hurts poorer families most and strains businesses," Georgieva warned.

"If unaddressed, this can cause lasting damage by pushing more people into poverty and forcing businesses to shut down," she added.

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The IMF boss noted that many countries are already under pressure to cushion households and businesses from surging fuel and energy costs following disruptions in global oil markets.

However, the institution warned that generalised subsidies and price caps often create more economic problems than solutions if maintained for long periods.

“Measures not designed thoughtfully can be fiscally costly and difficult to unwind,” the IMF Managing Director further reiterated.

According to her, governments should allow domestic fuel prices to reflect international market conditions instead of artificially suppressing prices through blanket subsidies.

The IMF boss argued that price signals help allocate scarce resources efficiently and reduce the risk of shortages in local fuel markets.

“Price signals play a major role in allocating scarce resources, encouraging efficient use, and preventing shortages,” Georgieva added.

📰 Source: Kenyans.co.ke