IMF says Britain does not need to speed up fiscal consolidation
TLT•The IMF said Britain should stay the course on deficit reduction rather than accelerate it, citing decisive action already taken. The government aims to balance day-to-day spending with tax revenue by 2029/30 and will present its first annual budget on October 28.
1. IMF backs current pace
IMF officials said Britain does not need to accelerate fiscal consolidation. Fiscal affairs director Rodrigo Valdes said the recommendation was to “stay the course,” while Managing Director Kristalina Georgieva said the UK had acted decisively to reduce debt and its deficit.
2. Borrowing and budget pressures
Britain ran a budget deficit of 4.4% of GDP last year and aims to balance day-to-day, non-investment spending with tax revenue by the 2029/30 financial year. Government borrowing costs are the highest in the Group of Seven and last week reached their highest level since 1998. Finance minister John Healey is due to deliver his first annual budget on October 28.
3. Spending priorities debated
Georgieva said markets showed “a bit more sensitivity” to British borrowing. Valdes said European countries faced similar spending pressures and called discussion of the social contract behind spending “very, very urgent.” Foreign minister Ed Miliband said Britain and other countries had limited fiscal space.
