Fiscal support low in developing countries - IMF - Financial Street is a meeting point for technology, economy, and journalism.

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Fiscal support among emerging markets and developing countries has been low owing to financing constraints, the International Monetary Fund disclosed in its April 2021 Fiscal Monitor report.

In advanced economies, however, the report showed that fiscal actions have been sizable and cover several years with a six per cent of gross domestic product in 2021.

The report further stated that although fiscal support has been more limited, however, that the rise in deficits was still notable as tax receipts have fallen.

“If the global pandemic is controlled via vaccination, the resulting stronger economic growth would yield more than $1trn in additional tax revenues in advanced economies by 2025 – and save more in fiscal support measures,” it explained.

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The COVID-19 vaccination will more than pay for itself providing excellent value for the public money invested in it, the IMF said.

According to the fund, the average overall fiscal deficits as a share of GDP in 2020 reached 11.7 per cent for advanced economies, 9.8 per cent for emerging market economies, and 5.5 per cent for low-income developing countries.

The pandemic has strained public finances across all country groups, the IMF stressed.

It said, “As a result, average public debt worldwide approached 97 per cent of GDP at the end of 2020 and is expected to stay just below 100 per cent of GDP over the medium term. Unemployment and extreme poverty have also increased significantly. The pandemic thus risks leaving a deep scar.”

There is a need to target more support to vulnerable households as well to viable firms, the fund urged.

In setting the stage for an economic transition, the IMF called on policymakers to strike a balance between providing fiscal support now, on the one hand, and keeping debt at a manageable level on the other.

“Some countries may need to start rebuilding fiscal buffers to lessen the impact of future shocks. Developing credible multi-year frameworks for revenue and spending will therefore be vital, especially where debt is high and financing tight,” IMF added.

The Fiscal Monitor was launched in 2009 to survey and analyse the latest public finance developments, update fiscal implications of the crisis and medium-term fiscal projections, and assess policies to put public finances on a sustainable footing.