The IMF is urging countries to act to counter downside risks threatening economic growth, the Fund’s Director of the Fiscal Affairs Department, Vitor Gaspar said at the launch of the Fiscal Monitor report Wednesday in Washington.
“Fiscal policy decision makers should be aware of elevated public debt ratios, financial vulnerabilities, and downside risks to nominal growth. For most countries, getting their fiscal houses in order means preparing for the next downturn or financial crisis. Fiscal policy also needs an upgrade.”
Gaspar says that governments have benefitted from the tailwind of continued low interest rates and correspondingly low debt payments. He said that policymakers should prepare for change.
“What we do know, from historical experience and empirical analysis, is that financing conditions are volatile, and they can change abruptly. There is no scarcity of financing crises. Some involving advanced economies. Some involving emerging market economies. Some involving low income countries. So, clearly, the risks associated with the rollover of high levels of public debt have not gone away. And those are the risks that we emphasize in the Fiscal Monitor, the risks that we believe that ministers of finance would be well advised to manage carefully.”
The report also focused on the economic drain of corruption. Gaspar said that addressing corruption can strengthen the overall economic structure of countries.
“You can think of the government budget as a complicated plumbing system. Corruption corrodes the pipes in the fiscal house. Precious financial resources leak out. Curbing corruption requires enduring political will and sustained reform to institutions and practices. Curbing corruption is difficult, but it brings important benefits.”
A copy of the full report is available at https://www.imf.org/en/publications/fm.