Breaking News
Investing Pro 0
Cyber Monday Extended SALE: Up to 60% OFF InvestingPro+ CLAIM OFFER

IMF urges governments to make fiscal plans to tame pandemic debt

Economy Oct 07, 2021 10:05AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A participant stands near a logo of IMF at the International Monetary Fund - World Bank Annual Meeting 2018 in Nusa Dua, Bali, Indonesia, October 12, 2018. REUTERS/Johannes P. Christo/File Photo

By David Lawder

WASHINGTON (Reuters) -Governments should start planning a return to more sustainable budgets with policies that win the trust of investors, after unprecedented fiscal stimulus to fight the COVID-19 pandemic, the International Monetary Fund said on Thursday.

But each country must determine the appropriate timing and pace of fiscal consolidation based on its own individual circumstances, the IMF said in its Fiscal Monitor report.

The fiscal plans needed to consider the stage of the pandemic, existing fiscal vulnerabilities, the risk of economic scarring, pressures from aging populations, development needs and historical difficulties in collecting revenues.

"There are countries where the pandemic is still raging and therefore the priority continues to be the health emergency," IMF deputy fiscal affairs director Paulo Mauro told Reuters in an interview.

Other countries where economic activity is picking up "can start thinking about also gradually reducing the degree of fiscal support that they provide to the economy", he said.

A Fiscal Monitor chapter titled "Strengthening the Credibility of Public Finances" said countries that commit to medium-term fiscal sustainability with credible budget frameworks are rewarded with lower borrowing costs and a greater ability to refinance debts.

"What we find in the report is, governments can commit credibly to fiscal sustainability, that buys them time, and it buys them flexibility in this very difficult period of the pandemic," Mauro said.

The report said IMF research showed countries with credible fiscal framework plans could more quickly reverse big jumps in debt, with feasibility for a 15% increase in debt to be reversed in a decade, absent additional shocks.

The Fund recommended that countries commit to broad fiscal targets with underlying tax and spending policies for the next three to five years, with specific policies, such as a tax increases or raising the age for securing retirement benefits.

Fiscal rules, such as keeping budget deficits within a certain percentage of gross domestic product, or independent fiscal councils within governments could add credibility, it said, adding that goals that were easy to communicate helped.

But the IMF said fiscal plans should be flexible to allow economies to stabilize and avoid cuts in key public investments.

"Changes to taxes or spending can be pre-legislated and can be made contingent on the recovery," the IMF said.

It cited Britain's announcement that corporate rates would rise in April 2023, and Israel's passage of a sunset for extended unemployment benefits linked to achieving a lower jobless rate.

IMF urges governments to make fiscal plans to tame pandemic debt
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email