Wednesday, August 20, 2014
Fuel subsidy bad idea that is getting worse
breaking news: "Together with a smaller electricity subsidy, the handout is expected to cost the country $31 billion next year, according to a draft 2015 budget released last week. That’s equivalent to about 18 percent of total government spending. The subsidy leaves public finances vulnerable to fluctuations in the global oil price and the currency. And it enables households to spend more on imported consumer goods. The result is a yawning current account deficit: 4.3 percent of GDP in the second quarter. If U.S. interest rates rise next year, investors may balk at financing the trade shortfall, just as they did in the summer of last year."
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