IMF Warns Over Public Debt Amid Slowing Growth
The International Monetary Fund on Tuesday applauded members' efforts to cut their public debt but warned that the burden still posed a big risk as the global economy slows.
In its twice-yearly Fiscal Monitor report, the Fund measured the fiscal health of 60 member states including the United States, China, Japan, Greece, India and Brazil, and found that about half were on target to bring their budget deficits under pre-financial crisis levels by next year.
"Despite substantial progress in restoring the sustainability of public finances, fiscal vulnerabilities remain elevated," the report said.
"Public debt rollover requirements are still very high and expose countries to the vagaries of financial markets," it added.
The report comes as the Washington-based IMF and World Bank began their annual meetings in Tokyo on Tuesday.
In a separate report, the IMF cut its global growth forecast for this year to 3.3 percent, from its July estimate of 3.5 percent, and warned that the situation could get worse if the eurozone debt crisis is not tackled and Washington fails to reverse a drastic austerity plan.
In its report on the state of nations' public finances, the IMF said that central bank moves to pump liquidity into the financial system have calmed market fears over rising debt loads.
"But these benign market responses are premised on continued fiscal adjustment and a favorable growth environment," it added.
That leaves policymakers in a tricky spot, having to balance debt reduction while supporting at-risk economies, the report said.
"With downside risks to the global economy mounting, policymakers must once again tread the narrow path that will permit them to continue strengthening the public finances while avoiding an excessive withdrawal of fiscal support for a still-fragile economic recovery," the IMF said.
However "considerable progress" had been made since the 2007-2008 global financial crisis in restoring fiscal health.
"In about half of the countries covered in this Monitor, deficits are expected to be at or lower than their pre-crisis levels next year," it said.
"The improvement in fiscal balances is most pronounced in advanced economies, where the fiscal shock was larger."
Source: Agence France Presse
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