From Malay Mail · · 1m 40s
IMF urges governments to cut costly subsidies
IMF warns high debt and spending pressures require governments to cut subsidies.
In brief
IMF warns high debt and spending pressures require governments to cut subsidies. IMF says high debt levels and rising interest rates mean governments must reduce subsidies to avoid worsening fiscal deficits. Originally reported by Malay Mail.
IMF warns on fiscal pressures
IMF official says high debt levels and rising interest rates create mounting fiscal challenges for governments worldwide.
“It’s a reality that debt is high. The debt-to-gdp ratio is increasing for the world economy. We have higher interest rates than a few years ago, and there are a lot of demand for more spending”
Global debt projected to exceed 100% of GDP
New IMF research shows global public debt is expected to surpass 100% of global GDP before 2030, increasing fiscal pressures.
Rising interest rates worsen debt scenario
Higher interest rates increase the cost of carrying debt, making it harder for governments to stabilize fiscal positions globally.
“Higher interest means that the cost of carrying debt is higher and therefore is a global phenomenon that implies that we need more efforts”
Defense spending adds to fiscal pressures
New defense spending in Europe and increased US spending contribute to rising fiscal demands across economies.
“I would say new defense spending in some countries, particularly in europe, but also some demand for more spending in the us”
Healthcare and pensions rise with aging populations
Population aging drives up healthcare and pension costs, adding to fiscal pressures as climate change creates additional investment needs.
“We have many sources of more spending pressures”
Low-income countries face oil price shocks
Low-income countries must prepare for oil price shocks and extreme weather events that could worsen food insecurity.
“They have to prepare for that”
Subsidies cost governments 0.5% of GDP
Governments have provided subsidies or tax cuts equivalent to about 0.5% of GDP to contain oil prices, though figures vary widely.
“governments worldwide have so far provided subsidies or tax cuts equivalent to an average of around 0.5 per cent of gdp”
Preventing price adjustments risks higher costs
If governments block oil price increases from reaching consumers, costs could rise by 1-1.5% of GDP, affecting global prices.
“if prices in some parts of the world do not adjust that means that consumption doesn’t adjust”
IMF urges targeted subsidy reforms
IMF recommends moving from inefficient subsidies to targeted, temporary, and transparent measures to stabilize debt and fiscal deficits.
“such policies also have significant spillover effects, valdes said underscoring the need to move away from inefficient and costly interventions toward measures that are targeted temporary and transparent”
Here's the gist
IMF says high debt levels and rising interest rates mean governments must reduce subsidies to avoid worsening fiscal deficits.
