Aside from a few countries such as South Korea and Vietnam, Srinivasan says most lack the fiscal space to fund generous support programmes for their people. “The point we are making is to the extent possible, provide targeted support,” he adds. “Where fiscal space is truly limited, make the support budget neutral. In other words, cut elsewhere to support people who are being hit by an energy shock. This is not the time to be adventurous on fiscal frameworks and so on.”
The energy shock from the war in Iran is testing governments worldwide. Oil-importing countries have been hit hardest, with India shuttering hotels and universities amid the crisis. Even Malaysia, despite ample fuel supplies, is feeling the strain as it works to sustain its fuel subsidy programme, which has grown tenfold since the war began.
For the International Monetary Fund’s (IMF) Asia-Pacific director, Krishna Srinivasan, the moment calls for even greater fiscal discipline in managing the crisis. “In terms of policy, what we are telling countries is this is a supply shock,” he told reporters during a media briefing at the IMF’s Singapore office on April 30. “What we have seen is that there has been a sequence of shocks [that] the world has faced. You had a pandemic. You had the Ukraine war, and now you have this. So, over the years, fiscal space has eroded across most countries in the region.”
