IMF urges government to develop financial plans to reduce pandemic debt

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File photo: Participants stand near the IMF logo during the 2018 annual meeting of the International Monetary Fund and the World Bank held in Nusa Dua, Bali, Indonesia on October 12, 2018. REUTERS / Johannes P. Christo / Archive photo

October 7, 2021

David Charger

Washington (Reuters) – The government is expected to start planning a return to a more sustainable budget with a policy that gains investor confidence after an unprecedented fiscal stimulus to fight the COVID-19 pandemic. The International Monetary Fund said Thursday.

However, countries need to determine the appropriate timing and pace for fiscal consolidation, the IMF said in a fiscal surveillance report.

Budget planning had to take into account the stage of the pandemic, existing financial fragility, the risk of economic scars, the pressure of aging, development needs and historical difficulties in raising income.

The Fiscal Monitor chapter, titled “Strengthening Fiscal Reliability,” gives countries time and less trouble to stabilize their debt by addressing fiscal sustainability within a credible medium-term fiscal framework. He said he could.

“When lenders believe the government is financially responsible, it will be easier to finance larger deficits and debt refinances,” the IMF said.

According to the report, according to an IMF study, countries that have adopted a credible fiscal master plan have lower borrowing costs, can cancel large increases in debt faster, and without additional shock. The 15% increase could be reversed within 10 years.

The fund promises a wide range of financial goals with the underlying tax and spending policies of each country over the next three to five years, and specific policies such as raising taxes and increasing the age to secure retirement benefits. Recommended.

Fiscal rules, such as keeping the budget deficit within a certain percentage of GDP, or an independent budget council within government, said this could increase credibility, adding that easily communicated targets help. paddy field.

But the IMF said fiscal planning should be flexible so that the economy is stable and avoids large cuts in public investment.

“Changes in taxes and spending can be legislated in advance and can be subject to recovery,” the IMF said.

He cited the UK’s announcement in April 2023 that corporate interest rates would rise and Israel’s sunset passing to extend unemployment benefits associated with falling unemployment.

(Report by David Lawder; edited by Edmund Blair)

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