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Why Fuel Subsidies in Developing Nations Are an Economic Addiction

Emerging economies worldwide struggle to end budget-busting subsidies
Why Fuel Subsidies in Developing Nations Are an Economic Addiction
Illustration by 731

Once again, Ukraine is turning to Europe and the International Monetary Fund for assistance, this time a $15 billion bailout. For years, negotiations with the IMF had stalled over a single point: Ukraine spends 7 percent of its gross domestic product on natural gas subsidies for consumers. The IMF wants that cut by a third before approving any loans.

Violetta Viktorova, a doctor in Kiev, says if the IMF gets what it wants, the utility fees she and her husband pay will go up. “We live from paycheck to paycheck. The rise in price would hurt us,” she says, though not as much as it would the country’s pensioners. Ukraine is balking at the IMF’s request.