Government spending support of $14 trillion has contributed to saving lives and livelihoods and has mitigated the effects of the pandemic on consumption and output, the IMF said in its Fiscal Monitor report released Thursday (January 28).
However, global public debt has risen sharply and is estimated to reach 98 percent of GDP at the end of 2020, compared with 84 percent for the same date previously projected in the October 2019 Fiscal Monitor.
“Covid-19 was a very large shock, fiscal policy came to the rescue, public deficits and debt increased everywhere. That was crucial to allow resources to be made available to the health system, to extend lifelines to firms and households, and to avoid an even greater contraction in economic activity and employment,” said Vitor Gaspar, Director of the Fiscal Affairs department at the IMF.
Gaspar stressed that global cooperation on access to treatments and vaccines is essential and that fiscal support to vulnerable households and firms need to be available as appropriate until the recovery is firmly underway.
“The pandemic will not be under control anywhere before it is under control everywhere. The sooner that happens, the sooner we will have a recovery, the sooner people and firms will be able to stand on their own two feet without government support. Making vaccines available globally is the best investment of all,” said Gaspar.
He also added that fiscal policy should support a sustainable recovery and facilitate the transformation to a green, digital, and inclusive economy while managing fiscal and financing risks.
“For economies that can afford it, public investment is extremely opportune. It can help create jobs. It can facilitate the transition to growth, which is smart, green, resilient, and inclusive. In times of elevated uncertainty like those in which we live, in public investment can provide a bridge that allows private entrepreneurs to cross and private investment to pick up,” said Gaspar
To read more about the report, click here