IMF Fiscal Monitor Sees Policy Shifts from Pandemic to Effects of War
IMF Fiscal Monitor
- IMF highlights delicate balancing act of fiscal support without exacerbating existing demand/supply imbalances
- Stresses the need for targeted fiscal support towards the vulnerable, particularly low-income developing countries or net commodity exporting nations
- Global cooperation is encouraged amid fertilizer and food supply concerns (wheat)
In the aftermath of the Global Financial Crisis, the IMF has monitored fiscal developments and public finance developments. The latest report can be accessed here: https://www.imf.org/en/Publications/FM/Issues/2022/04/12/fiscal-monitor-april-2022
Main Takeaways of the Report
- Tighter monetary policy to curb inflation will raise sovereign borrowing costs, narrowing scope for government spending, raising debt – IMF
- Global public debt to ease in 2022 and stabilize at 95% of GDP in the medium-term. Pre-covid debt levels sat at 84% of GDP
- Fiscal support ought to be targeted/limited to the most vulnerable in order not to avoid a food crisis and avoid exacerbating existing demand/supply imbalances
- IMF open to providing emergency financing to help vulnerable countries deal with food security issues
The fiscal monitor is particularly important to monitor as the global economy attempts to emerge from the Covid induced lockdowns, which led to increased public borrowing across the board to help citizens who were unable to work at the time.
Governments were more than willing to raise debt spending to alleviate hardships however, interest rates are set to rise at an alarming pace throughout the rest of 2022, raising the cost of borrowing and ultimately increasing debt repayments relative to GDP.
The previous report focused on pandemic legacies and the conflict in Ukraine. According to the IMF, fiscal policy ought to address the humanitarian crisis and economic disruption while being flexible and ready to adjust as the outlook becomes clearer
IMF World Economic Outlook Lowers Growth for 2022
Yesterday the IMF published its World Economic Outlook (WEO) which revised global growth lower, from 4.4% in January’s projection to 3.6%.
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--- Written by Richard Snow for DailyFX.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.