Chennai: The International Monetary Fund has advised countries, including India, which have elections this year, to begin fiscal consolidation in order to bring fiscal positions back to pre-pandemic levels.
When asked about the concern IMF expressed about the governments being tempted to increase public spending during election years in countries, including Mexico and India, Julie Kozack, Director of the Communications Department said in a press briefing that IMF’s advice at the time of the Spring Meetings still remains.
“Our advice is that this is the time for countries to really begin fiscal consolidation, and it's important to bring fiscal positions back to their pre-pandemic levels. So countries do need decisive efforts to safeguard public finances and to rebuild fiscal buffers,” she said.
“This is really our key message coming out of this publication at the Spring Meetings, that now is the time for countries to rebuild fiscal buffers at a time when debt pressures are high and deficits are high. And this advice holds in an election year, but irrespective of whether there are elections this year, it is the right advice in our assessment at this time,” she added.
However, she also said that the global economic outlook has improved a bit, particularly relative to where the IMF had expected it.
“Inflation has been declining, and we assessed in April that risks to the global outlook were balanced. All of that said, despite the resilience of the global economy, many countries are continuing to struggle with high levels of debt and high fiscal deficits. And this is happening at the same time that interest rates are high and medium-term growth prospects continue to be weak,” she said.
As per IMF, global debt-to-GDP ratio is at 93 per cent and global debt is 9 percentage points above pre-pandemic highs. By 2029 it is projected to reach around 100 per cent of GDP.
