Wednesday, May 22, 2024
26 C
Brunei Town

IMF says global debt levels face Great Election Year risk

WASHINGTON (AFP) – The path towards sustainable government debt levels around the world is under threat this year from the sheer number of elections taking place, the International Monetary Fund (IMF) said on Wednesday in a new report.

“History suggests, and empirical evidence confirms, that governments tend to spend more and or tax less in election year,” head of the IMF’s Fiscal Affairs Vitor Gaspar, told AFP, ahead of the publication of the Fiscal Monitor report.

He added that the situation this year is particularly complicated because, “the political discourse is dominated by references to fiscal expansion and calls for fiscal support or public spending – or both”.

The Fiscal Monitor report found that global public debt “edged up again” last year, reversing a couple of years of decline, due largely to a fall in revenues “as windfall revenues from inflation waned”.

“Fiscal tightening is projected for 2024, but it is subject to considerable uncertainty,” the IMF report continued.

File photo of the seal for the International Monetary in Washington, United States. PHOTO: AP

Much of this uncertainty, the IMF said, is down to the fact that 2024 is the “Great Election Year”, when 88 economies or economic areas representing more than half of the world’s population have held, or are due to hold, elections.

“Clearly, given the stronger link between fiscal policy and politics, it is perfectly reasonable to think that political factors and political discourse will play an added role right now,” Gaspar told AFP.

The IMF predicts that current spending and taxation levels have put global public debt on track to rise from just over 93 per cent of economic output last year to 99 per cent by 2029.

This trend is “driven by the world’s two largest economies, China and the United States, where under current policies public debt is projected to continue increasing beyond historical highs”, the IMF report said.

The United States experienced “remarkably large fiscal slippages”, last year, the IMF said.