By TheDailyNewsHub Reporter
The International Monetary Fund (IMF) has renewed the case for targeted assistance to vulnerable households, with Zeine Zeidane, Director of the Fund’s Africa Department, advocating a gradual shift away from subsidising products towards providing direct support to people who need it most.
Zeidane’s position is that governments should prioritise the protection of low-income and disadvantaged citizens rather than rely primarily on subsidies that lower the prices of goods and services for everyone, regardless of income.
He acknowledged that removing existing subsidies may not be achievable in a single step, suggesting that governments should phase them out gradually while putting targeted support measures in place for the most vulnerable members of society.
The recommendation comes amid renewed international debate over how governments can cushion households against rising living costs without placing excessive pressure on public finances.
In its October 2026 World Economic Outlook, the IMF examined the effects of cost-of-living crises and compared the effectiveness of different government responses across 76 countries over three decades. The report, published on October 12, favoured targeted, temporary income support as a more cost-effective way to protect vulnerable households than broad-based price interventions.
According to findings reported by Premium Times on October 9, the Fund estimated that consumer subsidies could require three to six times as much public spending as targeted cash transfers to provide comparable protection to lower-income households. Producer subsidies could cost 14 to 22 times more, the report found.
Broad subsidies are commonly used to limit the prices consumers pay for essential goods and services, including food and energy. However, because the benefits are not necessarily restricted to low-income households, wealthier consumers and businesses may also benefit from government spending intended to ease hardship.
Targeted support, by contrast, is designed to direct public resources towards households facing the greatest financial difficulties. Depending on a country’s social protection system, this may include cash transfers, temporary income assistance or other forms of support for eligible beneficiaries.
The IMF’s analysis also highlights the importance of protecting household purchasing power while preserving incentives for consumers and businesses to respond to changing market conditions. Keeping prices artificially low can weaken incentives to conserve scarce resources and make it more difficult for governments to withdraw support once introduced.
For governments considering subsidy reforms, the transition remains a major policy challenge. Removing subsidies without adequate safeguards can expose low-income households to sudden increases in the cost of essential goods and services. A gradual approach, supported by effective social protection programmes, can help reduce that risk.
The effectiveness of targeted assistance, however, depends on governments being able to identify eligible households and deliver payments reliably. Weak beneficiary databases, administrative gaps and difficulties reaching people outside formal financial systems can limit the impact of such programmes.
Zeidane’s recommendation therefore places emphasis on both the direction and the pace of reform: reducing reliance on broad product subsidies while ensuring that support reaches those who are most vulnerable.
The proposal reflects a wider IMF policy position that temporary and targeted assistance can protect households more efficiently during periods of high prices. Its implementation in individual countries would depend on local economic conditions, fiscal capacity and the ability of existing social protection systems to reach those in need.