IMF bats for fiscal and monetary tightening

The International Monetary Fund Wednesday asked countries to carry out targeted measures to address Covid-induced poverty across the world. “Millions cannot afford fuel for heating or cooking. Successive shocks have increased poverty, jeopardizing decades of progress,” Kristina Georgieva, managing director of the fund wrote in a blog post.

However, it also wants countries not to be profligate and to carry out fiscal tightening.

“ In most countries, targeted measures need to be coupled with gradual fiscal tightening to rebuild buffers and ensure debt sustainability,” she added.


While the emerging market and developing economies are expected to contribute 80% to global growth over the next two years, debt remains a concern for most economies.

IMF data found that 25% of emerging economies are at high risk of debt stress and face “default-like” borrowing spreads. The percentage was even higher at 45% for low income countries.

To address this the fund has announced Global Sovereign Debt Roundtable, which shall take place in Bengaluru this week at the gathering of G20 finance ministers and central governors under India’s presidency.

The fund also highlighted concerns with regards to monetary policy and batted for a monetary tightening to counter risks of inflation.

“The reality is that growth is still subpar and price pressures are still too high,” Georgieva said.
On the issue of sustainability, the IMF remarked that policies should focus on transition, instead of the developed world trying to give an advantage to the domestic firms.

“We must not slide into protectionism. This would make it even more difficult for poorer countries to access new technologies and support the green transition.”

Highlighting the goal of India’s presidency, Georgieva remarked, “to achieve the goals of ‘One Earth, One Family, One Future’, we need to find common ground even as geopolitical tensions are rising. And we need to steer clear of zero-sum policies that would only leave the world poorer and less secure.”