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Moderate fiscal tightening expected to resume this year – IMF (PHOTO)

WASHINGTON: Moderate fiscal tightening is expected to resume this year, said Vitor Gaspar, Director of the Fiscal Affairs Department, IMF, during a briefing on the Fiscal Monitor held as part of the IMF Spring Meetings in Washington, Trend reports.

He noted that the global economic and financial health has improved, inflation has fallen and risks to the global outlook are becoming balanced.

‘It is time to shift focus to fiscal policy. The global public debt edged up to 93 percent of GDP in 2023 and remained nine percentage points above pre-pandemic levels. Moderate fiscal tightening is expected to resume this year, but significant uncertainty remains for a record number of countries with more than half of the world’s population are holding elections,’ Gaspar explained.

He said evidence shows that in election years, realized deficits are four percentage points of GDP higher than budgeted.

‘Looking ahead, global public debt is projected to approach 100 percent of GDP by the end of the decade. This rise in g
lobal public debt is primarily driven by China and the United States, where public debt is now higher and expected to grow faster than pre pandemic projections. While modest fiscal tightening is projected over the medium term, it will be insufficient to stabilize public debt in many countries. And the current policies, primary deficits will remain above that stabilizing levels in 2029 in about a third of advanced and emerging market economies and almost a quarter of low income developing markets. Higher real interest rates and lower medium term growth prospects add to that profit pressures,’ he said.

Gaspar pointed out that against this backdrop, IMF’s latest fiscal monitor calls for durable fiscal tightening to safeguard public finances.

‘The base of consolidation should be calibrated depending on the fiscal risks and macroeconomic conditions that each country faces. Tackling debt and deficits today helps avoid more painful adjustments later. Fiscal tightening would also be an important contributor to comp
leting the last mile of disinflation, specially in economies characterized by excess demand,’ he said.

The Spring Meetings of the International Monetary Fund and the World Bank Group kicked off on April 15.

The main ministerial meetings and events will take place April 17-19 with other events and activities taking place during the week, April 15-20.

At the heart of the gathering are meetings of the joint Development Committee and the IMF’s International Monetary and Financial Committee, which discuss progress on the work of the World Bank Group and the IMF.

The Spring Meetings bring together central bankers, ministers of finance and development, parliamentarians, private sector executives, representatives from civil society organizations and academics to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness.

Source: Trend News Agency