Fiscal Policies for a Transformed World

Delivering sustainable economic growth
Posted Jul 11, 2020 | IMF, Vitor Gaspar, Gita Gopinath

As many countries tentatively exit the COVID-19 lockdown, the path of the recovery is deeply uncertain. Vitor Gaspar and Gita Gopinath argue in this IMF blog that the demand for large-scale fiscal support raises the question of how countries can finance it without debt becoming unsustainable. There is a great diversity in debt levels and financing abilities across countries and uncertainty in forecasts. Borrowing costs can increase rapidly for emerging economies and frontier markets. Countries that entered the crisis with high debt and low growth must find a path back to sustainable fiscal balances. Governments will need credible fiscal plans that minimize tax avoidance, strengthen progressive taxation and carbon pricing, and ensure more efficient spending, Transparent communication will contain volatility in sovereign debt markets and international institutions must ensure access to international liquidity by averting market panics. Vulnerable low-income developing countries (LIDCs) that lack the resources to support healthcare systems need access to concessional finance and grants. Seventy-two countries have already received IMF emergency assistance, but far more bilateral and multilateral support will be needed. And poorer nations may need continued debt relief, also through the G20 Debt Service Suspension Initiative


https://blogs.imf.org/2020/07/10/fiscal-policies-for-a-transformed-world/

 

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