2024-04-18 07:59:37
Inflation has eased, financial conditions have eased and risks to the outlook are balanced. However, many countries continue to struggle with high public debt and fiscal deficits amid new challenges from high real interest rates and clouded medium-term growth prospects. This was recorded in the spring edition of the reports “Fiscal Monitor” (Fiscal Monitor) presented by the director of the department of fiscal affairs in the International Monetary Fund (IMF) Vitor Gaspar during the spring meetings of the World Bank and the IMF in Washington.
“Budget deficits and debt rise again in 2023. Debt is higher and growing faster than predicted before the pandemic. But global generalizations blur the clear differences between countries. On the one hand, trends in China and the US lead to an increase in global debt At the other extreme, in the poorest countries, the scars of the pandemic are deeper and financing for them faces more challenges,” said Gaspar, quoted by BTA.
Fiscal policy shifted last year to a more expansionary one (one that in most cases increases the budget deficit – author’s note), after in the previous two years we rather observed limitations of these trends. Only half of the world’s economies tightened fiscal policy last year, with a drop of about 70 percent in 2022, the director of fiscal affairs at the International Monetary Fund also pointed out.
“Until 2022, fiscal policy in the United States followed a pattern similar to that of other advanced economies. But in 2023, while the gradual decline continued elsewhere in the world, the U.S. deficit widened unexpectedly in a procyclical manner. Going forward, the fiscal deficit is projected to of the US to remain high, leading to ever higher levels of debt.This raises interest rates and the dollar, which contributes to higher financing costs in the rest of the world.Finally, US fiscal policy will have to respond , to ensure stability,” added Gaspard.
History shows that governments tend to spend more and tax less during election years. Deficits in election years tend to exceed forecasts by 0.4 percentage points of GDP compared to non-election years. In this election year, where 88 countries around the world will go to the polls, governments must exercise fiscal restraint to keep public finances sound.