General Subsidies

Universal price subsides and untargeted sales of subsidized commodities are general measures aimed at controlling the prices of food and other essential commodities. For a list of general price subsidy programs, see table B.3 in appendix B. 

Contrary to targeted, in-kind distribution programs, subsidized prices or sales of commodities are not administratively targeted. This means that all consumers have access to the same commodities at the same price, albeit sometimes in a fixed amount, although even in this case, market interventions can be self-targeting to some extent in the case of inferior goods, that is, goods for which the quantity demanded falls as incomes rise (box 7.7). 

The main objective of subsidies is to guarantee access to food and other essential commodities at prices that consumers can afford. Controlling the prices of staple commodities is crucial not only for poor, food-insecure households, but it also responds to the political need to prevent prices from becoming too high. Indeed, reforms to remove existing subsidies are usually difficult to implement and are often marred by general dis- 

FOR PROTECTION AND PROMOTION THE DESIGN AND IMPLEMENTATION OF EFFECTIVE SAFETY NETS 

Governments may also provide universal access to food or other commodities through subsidized, untargeted sales at public distribution centers or designated private outlets on a first-come, first-served basis. This is the case for bread and flour subsidies in Egypt (box 7.8). When a government does not choose to subsidize all the sales of a commodity, quantities may be rationed by the imposition of limits on the amount that any one household may purchase. In such cases, governments impose quantity limits both to reduce 

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General subsidies. Subsidies for food, energy, housing, and utilities. 

Several studies show that general subsidies have rarely been used effectively to help poor consumers. 

Most of the following disadvantages of general subsidy programs are related to poor targeting and high budgetary costs ... 

Popular general subsidies are difficult to reform and remove. Poor urban populations have often shown their discontent with reforms and with reduced price subsidies by rioting. A recent example is the riots that took place in the Republic of Yemen in July 2005 after fuel prices went up these left 22 people dead and hundreds injured (Baig and others 2007). 

General subsidy programs can have a role for poor consumer households when access to essential commodities is threatened by high prices however, adapting them efficiently to local situations is difficult. 

The use of general subsidies is most relevant when the prices of essential commodities are too high and may have a negative impact on consumption by the poor. In some cases prices may have risen quickly because of a bad harvest, a natural disaster, or changing terms of trade in international markets. In Madagascar in 2004, the combination of a production shortfall and an increase in the cost of rice imports caused a rapid increase in local prices. 

The two biggest challenges to successful implementation of general subsidy programs are reaching the intended beneficiaries and keeping the budget under control. These objectives can be achieved in a variety of ways as follows ... 

General subsidies. Measures aimed at controlling the prices of food and other essential commodities or services. 

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