Even before finance officials from around the world head to Washington for the International Monetary Fund meetings, which begin Monday, the fund has urged them in advance to tighten their belts.
With about two weeks to go before a US election that could set the tone for a new era, and with the latest inflation crisis that swept the world coming to an end, ministers and central bankers meeting in Washington are facing growing calls to get their finances in order while they still can.
The fund has already hinted at some of the themes it hopes to address in a series of global economic forecasts and studies in the coming days. The IMF’s Fiscal Monitor report on Wednesday will include a warning that global debt levels are set to hit $100 trillion this year, driven by debt from China and the United States. The debt mountain is weighing the world down, IMF Managing Director Kristalina Georgieva said in a speech on Thursday.
“Our forecasts suggest that the unforgiving combination of low growth and high debt paints a difficult future,” she said. Governments must work to reduce debt and rebuild their fiscal buffers to cushion the next shock, which is sure to come, perhaps before we expect it. Some finance ministers may even receive further warnings before the end of the week.
UK Chancellor of the Exchequer Rachel Reeves has already faced a warning from the International Monetary Fund about the risk of a market backlash if debt levels are not stabilised. Tuesday is the last UK public finance data release before its budget is due on October 30.
Meanwhile, Moody’s has set a possible report on France, which is under intense investor scrutiny at the moment, for Friday. With its rating one notch higher than its main rivals, markets will be watching for any downgrade.
As for the biggest borrowers of all, a glimpse of the IMF report already published contains a grim warning that your public finances are everyone's problem.
The fund said that high debt levels and uncertainty surrounding fiscal policy in important countries with an impact on the financial system, such as China and the United States, could generate significant spillover effects in the form of higher borrowing costs and debt-related risks in other economies.
