World Bank: Energy subsidies cutting through education and infrastructure spending

Increased spending on energy subsidies by Indonesia because of rising global oil prices is affecting the country’s investments in areas such as education and infrastructure, according to th World Bank.  Indonesia projects it will spend US$15.85 billion on energy subsidies in 2011.  Shubham Chaudhuri, lead economist for the World Bank says, “The high oil prices seen over 2011 have increased spending on poorly targeted energy subsidies.  Increased public spending on subsidies means a higher opportunity cost in terms of money which could be spent on pressing development needs, such as education, health, social protection, and infrastructure. The savings from reform could also be used for cash transfers to limit the impact on vulnerable households.” (June 28, 2011)