Emmanuel Ukudolo
US, March 5, 2016 – The International Monetary Fund(IMF) has said that the sum of to $5.3 trillion was invested in subsidy globally in the year 2015.
He said the amount represents 6.5 percent of Gross Domestic Product, warning that the staggering sum need to be brought down so that resources could be better used.
“We estimate that global energy subsidies amounted to $5.3 trillion last year, or 6.5 percent of GDP. This staggering number needs to come down so these resources can be better used. Doing it now, when energy prices are low, makes it that much easier”, she said.
The IMF boss called for better management of public investment.
“Our research shows that the most efficient public investors get twice the growth “bang” for their “buck” than the least efficient”, she said adding that more emphasis should be on energy taxation and less reliance on energy subsidies.
She noted that global poverty level has come down sharply from 44 percent in 1981 to 13 percent. IMF puts the poverty line at $1.90 per day. China, she contended succeeded in lifting 750 million people out of poverty in the last three decades.
“Global poverty has also come down sharply. People living at or below the poverty line of $1.90 per day account for 13 percent of the world’s population, down from 44 percent in 1981. China alone has lifted more than 750 million people out of poverty over the past three decades”.
She argued that average life expectancy around the world has jumped from 47 years in 1950 to 71 years today, but that it varies from a low of 61 years in Africa to a high beyond 80 years in northern America, Japan, and many European countries.
Among the game changers she identified is an entitlement reform.
“Start with health care—which accounts for the lion’s share of age-related expenditure increases. Increasing competition among insurers and service providers will help”, she advised.
She advocated for more targeted spending, paying more attention to primary and preventive health care, promoting healthier lifestyles, and making more effective use of information technology.
She believes that costs can be reduced by making greater use of heath data history or using unique health identifiers for individuals.
“If these efforts can be sustained over many years, it would help governments to bend the cost curve. Another priority is lifting retirement ages to match longevity gains. This would bolster the pension system and extend the productive life of individuals.
“ At the same time, however, policymakers need to put in place a proper safety net for those who might not be healthy enough to work longer. Pension systems also need to be flexible enough to respond to demographic shifts.
“The Japanese system, for instance, automatically slows the growth of benefits to offset increases in life expectancy and changes in the labor force. Other countries—such as Germany, Finland, and Portugal—also link benefits to life expectancy.
‘’More broadly, in the current environment of already depressed aggregate demand, we need savvy fiscal policy—one that supports demand while ensuring sufficient savings in pensions and health care”, she said.
