(Bloomberg) -- Saudi Arabia’s total spending on fuel subsidies soared over the past two years, hitting the highest among the Group of 20 economies on a per capita basis.

The country spent almost $7,000 per person, equivalent to about 27% of economic output, across both explicit and implicit energy subsidies, according to a paper published by the International Monetary Fund. 

Fossil fuel subsidies soared globally since 2020 to $7 trillion last year as governments took measures to protect consumers and businesses from a spike in prices following Russia’s invasion of Ukraine, according to the IMF paper. It estimated that cutting fossil fuel subsidies could help reduce carbon dioxide emissions, deaths from air pollution and boost government revenues.

“Fossil fuels in most countries are priced incorrectly,” Simon Black, Antung A. Liu, Ian Parry and Nate Vernon wrote in the IMF working paper. “Unfortunately, current prices are routinely set at levels that do not adequately reflect environmental damages and, in some cases, not even supply costs.”

China - which spent $2.2 trillion - was the biggest provider of subsidies in absolute terms, followed by the US and Russia, according to the IMF. Saudi Arabia spent a total of $253 billion on subsidies last year.

The IMF has been urging Saudi Arabia to push ahead with measures to cut the government subsidy bill and take steps to protect the welfare of low-income households through increased and targeted social spending. The spending has made Saudi gasoline one of the cheapest in the world.

In 2021, the government set a cap for the domestic cost of gasoline to soften the impact of higher living costs on citizens, just months before prices soared to over $100 a barrel.

Read: Saudi Arabia Should Lift Cap on Domestic Fuel Prices, IMF Says

In its Article IV Consultation last year, the IMF said that the kingdom’s work on subsidy reforms is “continuing unabated through planned step price increases that will lead to their elimination by 2030.” 

Implicit subsidies, which the IMF defined as undercharging for the environmental cost of fossil fuel burning and lost tax revenue, made up the bulk of the global total. Explicit subsidies, or selling fuels as below supply costs, had a share of just 18%.

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