Washington: Governments should avoid using general subsidies as a means of softening the shock caused by recent high energy prices, the IMF said on Wednesday.

Large grants are expensive, so policymakers should instead use targeted aid to help low-income families most affected by the recent wave, said Paulo Medas, of the IMF’s fiscal department.

Widespread energy subsidies “benefit wealthy households that don’t need them,” making them very expensive, Medas told reporters.

In addition, “they are not environmentally friendly, in fact they lead to very negative incentives”.

The IMF recommends “using more targeted support to those who are most vulnerable and hardest hit,” including cash transfers or subsidizing electricity bills for low-income families.

Oil prices have risen in recent weeks to the highest levels seen in years, surpassing $ 80 a barrel, adding to concerns about a permanent rise in inflation.

Medas said the increase was expected to some extent as global demand rebounded amid the recovery from the Covid-19 pandemic, but pointed to pressure from the IMF for countries to switch to more energy green.

“The reality is that we have been dealing with this great volatility in oil and gas prices for a long time. And the only way to deal with this permanently” is to invest more in renewables, he said.

“This will be the only way to build a resilient economy and protect households from the volatility of oil and gas prices.”