ADB Urges Governments to Target Fuel Subsidies to Vulnerable Groups

The Asian Development Bank is calling on governments to shift from broad-based fuel subsidies to targeted support for the most vulnerable households, warning that blanket programs are straining public finances at a time of rising energy costs and heightened fiscal pressure.

The Details

ADB chief economist Albert Park delivered the message in an interview on the sidelines of the bank's 59th Annual Meeting in Samarkand, Uzbekistan, which runs from May 3 to May 6, 2026. "Our advice to all countries is, if possible, to target subsidies to vulnerable groups rather than apply across the board," Park said. He urged governments to make that transition "as soon as they can" in order to preserve fiscal resources.

Context

The comments come as prolonged tensions in the Middle East have pushed energy costs higher across the region and beyond, tightening the fiscal space available to policymakers. Japan has emerged as a prominent example of the trade-offs involved. The government has capped gasoline prices at roughly ¥170 per liter through subsidies after prices climbed to about ¥190 following the outbreak of conflict in the Middle East. At the same time, Reuters reported on April 30 that Japanese officials are considering reviving subsidies for electricity and natural gas from July through September, with a budget that could reach about 500 billion yen ($3.1 billion). Those measures would target retail electricity and city gas prices and would be funded from reserve funds rather than a supplementary budget, according to a source with direct knowledge of the matter. Park noted that Japan's high budget deficit and rising interest rates were adding to market concern about fiscal sustainability, which may be contributing to higher bond yields. Japan's 10-year government bond yield has risen above 2.5%. An International Monetary Fund projection cited in the report put Japan's debt-to-GDP ratio at 204% this year. The ADB's annual meeting agenda lists fiscal sustainability as one of its core themes, noting that governments across the region are facing growing pressure to mobilize capital and strengthen domestic resource systems.

What's Next

Japan's deliberation over summer electricity and gas subsidies is expected to conclude in the coming weeks, with a potential rollout from July if approved. Any decision will be closely watched as a test of how developed economies in Asia balance consumer relief with long-term fiscal credibility. The ADB's Samarkand meeting continues through May 6, with fiscal sustainability and financing for development among the central topics on the agenda.