IMF dials up calls for urgent fiscal consolidation

The International Monetary Fund has urged advanced economies and other nations to act now on their public finances, warning that postponing cuts to spending and reductions in borrowing will only make the task harder later. Rodrigo Valdes, who leads the fund's Fiscal Affairs department, said conditions had shifted and the message had become more pressing ahead of this week's meetings in Bangkok. Business Recorder reported the warning on Wednesday.

Valdes said public finances this year had come in weaker than forecast six months ago and weaker than a year earlier. He added that average public debt was on course to reach 100 per cent of gross domestic product, the highest level since the Second World War. Rising government bond yields, inflation and higher energy prices were adding to the strain, leaving less room for delay.

Delaying adjustment would raise interest burdens and further narrow policy options, the fund said. Governments in advanced economies are also rolling over debt on shorter terms, so higher rates reach their budgets more quickly. In several countries, interest rates on debt now exceed expected nominal growth, which makes stabilising debt harder still.