Subsidies are intended to protect consumers by keeping prices low. But they also come at a high cost.
Subsidies are expensive for governments—and therefore taxpayers—to finance and can hinder governments’ efforts to reduce budget deficits. They also compete with other priority public spending on roads, schools, and healthcare.
All consumers—both rich and poor—benefit from subsidies by paying lower prices. Governments could get more “bang for their buck” by removing or reducing subsidies and targeting the money directly to programs that help only the poor.
See full Article: http://www.imf.org/external/np/fad/subsidies/index.htm
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