He International Monetary Fund (IMF) This Wednesday he called on governments to control public spending to preserve the soundness of finances and not to follow a trend that usually occurs in election years: spend more and tax less.
“History and empirical evidence show that governments tend to spend more and tax less during election years” and 2024 is a “particularly challenging” year, with dozens of elections affecting more than half of the world’s population, he explained. to EFE in an interview the director of the Fund’s Department of Budgetary Affairs, Victor Gaspar.
The IMF today published the latest data from its fiscal monitor and calculated that in 2024 there will be a fiscal adjustment again and the world deficit will close the year at 4.9% of GDP, compared to the 5.5% it registered at the end of 2023. .
However, medium-term fiscal consolidation is expected to remain modest, with the overall deficit expected to stabilize at 4.3% of GDP by 2029, around 0.7 percentage points higher than in 2019.
As for global debt, it is expected to close at 93.8% of GDP this year and continue to rise to close to 100% of GDP by 2029 (98.8%), an increase led by some large economies such as China, Italia y USAwhich need to adopt measures “urgently” to address imbalances between spending and income, the Fund notes in its report.
The IMF presented the fiscal monitor within the framework of the spring meetings it is holding these days in Washington together with the world Bank and that they are bringing together the main economic authorities in the world.
The forecasted data, the Fund points out, could worsen due to the particular situation experienced this year, when a record number of countries, where more than half of the world’s population lives, will hold national elections.
History shows that governments tend to spend more and tax less during election years, and according to the IMF, deficits in these periods tend to exceed forecasts by 0.4 percentage points of GDP, compared to non-election years.
«Political discourse predominantly reflects calls for public spending, fiscal support and fiscal expansion. These political circumstances are accompanied by economic and financial demands derived from high, uncertain and volatile interest rates, and a slowdown in medium-term growth prospects.Gaspar pointed out.
Therefore, it is essential that governments “avoid deviations and focus on rebuilding reserves and safeguarding fiscal sustainability in the medium term,” he stated.
Although the global economic and financial outlook has improved over the past six months, inflation has fallen and financial conditions have eased, the IMF notes in the report, many countries “continue to struggle with high public debt.”
Thus, the modest fiscal adjustment that the Fund forecasts in the medium term (a deficit of 4.3% in 2029) is “insufficient to stabilize public debt in many countries.”
Under current policies, primary deficits (excluding interest expenditures) will remain above debt stabilization levels in 2029 in about a third of advanced and emerging market economies and in almost a quarter of low-income developing countries.
The size of additional adjustments needed varies, the Fund notes, and is “particularly large” for emerging markets with rising public debt-to-GDP ratios. EFE (I)
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